While Mylan and Teva Continue Bickering, Perrigo Snaps Up OTC Portfolio From GlaxoSmithKline

Published: Jun 02, 2015

While Mylan (MYL) and Teva (TEVA) Continue Bickering, Perrigo (PRGO) Snaps Up OTC Portfolio From GlaxoSmithKline (GSK)
June 2, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor

The complicated attempted buy up of Pittsburgh, Penn.-based Mylan Pharmaceuticals, Inc. by Israeli company Teva Pharmaceutical Industries Ltd. added another weary chapter Tuesday, as the two companies continued bickering and a related target, Perrigo Company said it will buy a portfolio of drugs from GlaxoSmithKline for an undisclosed amount.

Perrigo’s new buy encompasses GSK products that raked in $110 million in sales in 2014. It includes GSK’s NiQuitin nicotine replacement therapy units in Europe and Brazil, as well as Novartis AG ’s legacy Australian NRT business, including the Nicotinell brand; several assorted OTC brands including Coldrex (cold and flu treatment) across the EEA, and Panodil (pain relief), Nezeril (nasal decongestant), and Nasin (nasal decongestant) in Sweden; and Novartis’s legacy cold sore management products primarily in the EEA, marketed under the brand names Vectavir, Pencivir, Fenivir, Fenlips and Vectatone.

Perrigo said it is building on the platform it acquired when buying Omega Pharma last November for $4.5 billion.

Perrigo is uniquely positioned to maximize the potential of these brands by leveraging Omega Pharma’s leading European commercial infrastructure, pan-European distribution network, strong brand-building capabilities, and exceptional management team,” said Perrigo Chairman, President and CEO Joseph C. Papa in a statement.

“This announcement comes on the heels of our recent acquisition of European OTC dermatological product, Vitasil, which recently closed. With our global platform in place and our robust balance sheet, we are ideally positioned to execute immediately accretive deals, such as this one, that will have a multiplier effect on our growth.”

Meanwhile, Mylan and Teva Pharmaceutical Industries Ltd. continued to bicker over the increasingly hostile takeover of Mylan by Teva, with Mylan saying yesterday in a letter to Teva’s CEO that it considers last week’s stake buying by Teva to be a significant anti-trust issue.

"We consider Teva's stakebuilding as a further indication of its intention to meddle with our business, strategy and mission while remaining unclear as to its actual intentions," Mylan said in a letter addressed to Teva CEO Erez Vigodman.

Last week Teva bought 1.35 percent of Mylan NV’s stock in an effort to force the company to accept its already rejected $43 billion bid.

“Acquiring shares of Mylan underscores our commitment to consummating a transaction as soon as possible,” Teva said in a statement Wednesday. Mylan did not issue a statement on the move.

Teva’s efforts so far have been thoroughly rejected by Mylan, with the company’s increasingly testy statements about the proposed merger becoming a very public testimonial to just how acrimonious the process is becoming.

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.

Any eventual merger could mean more than $27 billion in revenue from the combined companies, although Mylan’s public rebuke of its suite April 17, in which it raised concerns about antitrust issues, continues to worry analysts.

After months of rumors about the deal, Teva finally made its bid official last month in an $82 a share in cash and stock deal that would be the biggest takeover attempt so far this year. That bid is 23 percent above Mylan’s closing price April 16. But that price was far too low for Mylan, an ironic twist considering its bid for smaller company Perrigo Company (PRGO) was last week rejected by Perrigo for also being an undervaluation.

“After thorough consideration, Mylan's Board unanimously determined that Teva's proposal grossly undervalues Mylan, and would require Mylan's shareholders to accept what we believe are low-quality Teva shares in exchange for their high-quality Mylan shares in a transaction that lacks industrial logic and carries significant global antitrust risk,” said Mylan in a statement Monday.

“In addition, we also believe that the proposal does not address the serious challenges of integrating two fundamentally different and conflicting cultures under a Teva Board and leadership team with a poor record of delivering sustainable shareholder value. We believe that these challenges would make it very difficult to generate value from this combination for Mylan shareholders.”

A week after that bid, in a letter to Teva’s management from Robert J. Coury, Mylan’s executive chairman, made public by Mylan, it was clear the company is becoming increasingly irritated by what it sees as an attempt to railroad it into accepting the proposal.

“Dear Erez,” wrote Coury. “First, let me say what a pleasure it was to meet you for the first time in New York last Friday. As we discussed, I was very disappointed by your decision to make your interest in Mylan public without first taking the time to speak to me or meet in person.”

“As those who know me will attest, I always am willing to discuss opportunities to create value for Mylan's shareholders and other stakeholders, and although it was after-the-fact, I was happy to grant you the opportunity to meet with me in person to hear your rationale outlined in your letter dated April 21, 2015.

During our meeting, we touched on Teva's many struggles throughout the last several years, including the approval of the first generic version of your flagship product Copaxone (despite Teva's claims that an AB-rated generic would never be approved); the persistent turnover and turmoil amongst the Teva leadership and Board and the resulting strategic confusion; Teva's consistent underperformance in comparison to the market and our industry; and your increasing need to find new sources of future growth. As I am sure you are aware, Mylan's historical compound annual growth rates (CAGR) in terms of revenues and adjusted EBITDA from 2011-2014 are more than double Teva's.

He continued:

“Erez, you told me in our meeting that Teva is different now and the challenges and cultural issues you have faced previously were now in the past. You assured me that Teva's new Board and management team had brought a new approach to the way it does business. Yet, this change was not evident in the way you approached your interest in Mylan. Through your leadership, you had the opportunity to set the right tone, and show the world that there is a new Teva. Instead, you chose to approach Mylan in a way that demonstrates that the old Teva is very much still alive, which only continues to beg questions about Teva's credibility.“

Teva ignored that letter.

Teva lost patent protection for multiple sclerosis drug Copaxone, for which Mylan makes a generic, last July after a U.S. Federal Appeals Court found the patent protecting the drug would expire in May 2014, not September 2015.

“The attraction for Teva is that this deal would immediately allow them to grow and reduce their exposure to the impending drop in Copaxone sales,” said Sam Fazeli, an analyst at Bloomberg Intelligence in London, told Bloomberg. “We still would have to consider the ramifications of antitrust regulation.”



Will PfizerKline Become the Next Pharma Player?
The speculation surrounding a possible bid from Pfizer Inc. for struggling GlaxoSmithKline is heating up, after one closely-watched biotech analyst said in a note last week that Pfizer buying the company would “unlock access to its balance sheet and improve its tax situation.”

Gregg Gilbert, a biotech analyst at Deutsche Bank, wrote in a note to investors “Introducing PfizerKline” that he thinks a deal would be “materially accretive” for both companies. Gilbert estimated that a bid priced at $29.86 a share, via half stock and half cash, which would push up Pfizer’s earnings per share by 10 percent to 16 percent beginning in 2016.

“We believe that the company has a sense of urgency to create value by leveraging the power of its balance sheet to do needle-moving deals,” Gilbert wrote. “Since media reports in the past have pointed to the potential for a Pfizer/GSK combination, we are revisiting that theme.”

We want to know, dear readers, if you agree? Should Glaxo continue going it alone, or might Pfizer buy it and create one of the world’s largest pharma players in history?

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