Recent Signs Mylan May be Gobbled Up by Teva

Recent Signs Mylan (MYL) May be Gobbled Up by Teva (TEVA)
March 17, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Rumors are spiking this week that Israel-based Teva Pharmaceutical Industries Ltd. might acquire Canonsburg, Penn.-based Mylan N.V. Although the rumors seem to be based on almost nothing, they have caused stock to spike and investors and analysts to take a closer look at the two companies.

Mylan is one of the largest generics and specialty pharmaceutical companies in the world, with about 1,400 different products it markets. Teva also focuses on generics, as well as specialty drugs and active pharmaceutical ingredients. It has a portfolio of more than 1,000 molecules, employs more than 45,000 people worldwide and sells in 60 countries.

Part of the speculation may be caused by an increased trend in generics. Not only is the population aging significantly over the next decade with the over-60 population worldwide hitting 30 percent by 2025, but many name brand drugs are losing patent protection, opening up the market for competitively priced generics.

Mylan stock has been on a moderate, though inconsistent, increase since about Aug. 12, 2014 when it was selling for $44.97. On Feb. 24, 2015 it sold for $57.22, but on rumors of a possible acquisition, jumped to a current price of $61.27.

Teva stock as well, has been on a moderate, though someone inconsistent rise for some time. On April 25, 2014, stock sold for $48.69. It increased for a while before a drop to $49.86 on Oct. 13, 2014. It then took a sharp spike upward $57.97 on Nov. 5, 2014. On March 9 it sold for $56.20 before taking a sharp hop to its current price of $60.41.

Wherever the rumors are coming from, not everyone’s buying it. David Maris, analyst with BMO pointed out that there is no source for the rumors and in his opinion, whoever says the deal is likely is “just putting out fluff.”

Maris’s skepticism is related to Mylan recently acquiring some of Abbott Laboratories ’s sagging European generics as part of a tax inversion deal. He goes on to point out that if Teva bought Mylan, the Israeli company would have two choices, Mylan to Israel, which has major tax disadvantages, or compete an inversion and change its domicile to the Netherlands, which would violate Teva’s bylaws.

Maris also believes the acquisition wouldn’t be very good strategically. “Mylan bought the Abbott products to focus in on Europe—particularly France—and that’s not an area Teva is interested in,” he said in a statement.

In addition, Maris thinks that Teva’s debt capacity is too small to pull off a Mylan deal. Mylan has a $22 billion-plus market cap, and with a premium and the company’s debt, the deal would be at about $30 billion. “They’re not going to go to junk status,” Maris indicates in a statement, just to finance this deal.



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