It’s been described as a brawl in the pharmaceutical industry, a Shakespearian comedy featuring generic drug giants as star-crossed lovers. No matter what it’s called, there’s no end in sight for the three-way buyout drama underway between rivals Teva, Mylan and Perrigo.
Israel-based Teva is the world’s largest producer of generic drugs. It is set on buying No. 3 generic drug-maker Mylan, a Pittsburgh-based company that recently reincorporated in the Netherlands. Mylan has made its own offer to buy Ireland-based Perrigo, a supplier of store-brand over-the-counter drugs.
But the drama has been in the details.
On April 21, Teva made an unsolicited offer to buy Mylan for $40 billion. Teva has annual revenue of $20.3 billion; Mylan has annual sales of $7.6 billion.
Mylan’s board unanimously rejected the Israeli company’s takeover offer. In a stinging letter to Teva chief executive Erez Vigodman, Mylan executive chairman Robert Coury dismissed Teva’s corporate culture as “dysfunctional.”
He wrote: “Combining our two organizations to achieve growth requires more than just sorting through size and complexity. We believe that significant cultural differences would make the successful integration of the two companies nearly impossible.”
He added that a merger deal would attract scrutiny from antitrust regulators.
Vigodman’s response to Coury’s letter was more restrained.
“We are eager to work with Mylan and its advisers to complete a transaction that will allow us to deliver the value inherent in the proposed combination to our respective stockholders, employees, patients, customers, communities and other stakeholders,” he wrote in a statement.
When Teva made its offer, Mylan was trying to acquire Perrigo. Its continued pursuit of Perrigo, which has annual sales of $4.1 billion, is seen by some as an attempt to fend off Teva. In recent weeks, Mylan made three offers to Perrigo, all of which were spurned.
These attempts to swallow industry rivals comes as both Teva and Mylan are searching for new revenue sources. Each company produces a lucrative branded product that will soon be eligible for manufacture as generic drugs. Teva manufactures the multiple sclerosis drug Copaxone, which accounts for nearly half of the company’s profits, according to The Scientist. Mylan produces EPiPen for allergies.
Teva’s roots are in pre-state Palestine. It was founded in the 1930s, along with other pharmaceutical companies, which were subsequently combined. In 1951, Teva raised capital through the Tel Aviv Stock Exchange.
Its $40 billion offer to buy Mylan would be the largest acquisition in Israel’s history, equivalent to 15 percent of the country’s GDP, according to Reuters.
The Israeli company expects the deal to produce more than $30 billion in revenues and save $2 billion in cost synergies. But, according to stock analyst Frank Curzio, that’s likely to mean bad news for Teva employees.
“This number is conservative, as massive layoffs are likely. (Layoffs are common when two companies in the same industry merge.),” he wrote.
That has Israeli entrepreneur and Teva activist investor Benny Landa worried.
“When I ask myself what’s good for the company and the country,” he told Globes, “I feel doubtful whether acquiring Mylan, which makes Teva yet more generic, will really make its Israeli workers much more competitive than Teva workers in other countries.
“As long as the decision made is purely a business one, it’s not certain that the Israeli worker will have an advantage over his Indian counterpart,” he added.
This week the story took a new twist. Mylan’s Coury told investors that the company would consider buying Teva “down the road,” once “the Perrigo transaction is completed,” Reuters reported.
David Holzel writes for the Washington Jewish Week. He can be reached at email@example.com.