Pharmabiz
 

Teva to buy global generics business of Allergan for $40.5 bn

DublinMonday, July 27, 2015, 15:25 Hrs  [IST]

Teva Pharmaceutical Industries has entered into a definitive agreement with Allergan plc to acquire Allergan's global generic pharmaceutical business for $40.5 billion. Allergan will receive $33.75 billion in cash and 6.75 billion in Teva stock.

In addition, Allergan retains 50 per cent of Teva's future economics from generic lenalidomide (Revlimid).  The transaction has been unanimously approved by the boards of directors of Allergan and Teva and is strongly supported by the management teams of both companies.

The transaction is expected to close in the first quarter of 2016.  JP Morgan is acting as sole financial advisor to Allergan and Latham & Watkins LLP is serving as Allergan's lead legal advisor.

Under the agreement, Teva will acquire Allergan's legacy Actavis global generics business, including the US and international generic commercial units, third-party supplier Medis, global generic manufacturing operations, the global generic R&D unit, the international over-the-counter (OTC) commercial unit (excluding OTC eye care products) and some established international brands.

Allergan will retain its dynamic global branded pharmaceutical and medical aesthetic businesses, as well as its biosimilars development programs and the Anda distribution business.

"This transaction will accelerate Allergan's evolution into a branded Growth Pharma leader, enable a sharpened focus on expanding and enhancing our global branded pharmaceutical business and strengthen our financial position to build on our proven track-record of value creation led by effective capital deployment," said Brent Saunders, CEO and president of Allergan.

"Allergan expects to have 2015 pro forma sales of approximately $15.5 billion, a simplified operating model and a strong position in seven therapeutic areas, including eye care, gastroenterology (GI), aesthetics, women's health, CNS, urology and anti-infectives.  Allergan will have a simplified manufacturing network of 12 plants globally, an industry-leading mid-to-late-stage R&D pipeline with 70 projects and a global commercial operating model engineered to drive double-digit branded product sales with compelling profit margins.

"The transaction results in after tax net cash and equity proceeds of approximately $36 billion that we intend to deploy to further accelerate the robust growth prospects of our branded business.  We will have the potential to add scale in existing therapeutic areas, expand into new therapeutic areas and geographies and evaluate strategic transformational deals as we continue to build on our position as the most dynamic branded growth pharma company.

"Over the years, our global team of highly capable and dedicated employees has dramatically expanded our generics portfolio, capabilities and footprint, with over 220 ANDAs pending for FDA approval with 74 confirmed First-to-File opportunities, creating one of the most dynamic generics businesses in the world today.  While we were not actively seeking a buyer for our generics business, Teva presented an offer at a very compelling valuation that reflects and recognizes the significant value that our global generics team has generated in creating and managing a world-class generics business.  As a result of the transaction, we will also obtain a minority equity interest in Teva, to share in the upside of the generic R&D pipeline we are transferring in this combination."

The new Allergan will maintain its exceptional global brand pharmaceutical business with leading positions in key therapeutic categories.  The company has blockbuster franchises in eye care, CNS, aesthetics, GI and women's health including world-renowned brands such as Botox, Restasis, Juvedrem, Namenda XR, Linzess and Lo Loestrain Fe among others.

The company's commercial presence will extend across the globe with a significant presence across the UK, Canada, Europe, Southeast Asia and Latin America and a growing footprint in the Nordics, Russia, Eastern Europe, China and India.  

Allergan will maintain its strong commitment to R&D, with 2015 pro forma investment of approximately $1.4 billion, focused on the development of innovative and durable value-enhancing global products within our brands and biologics portfolios.  Allergan has a strong record of successful drug development and currently has more than 70 innovative products in mid-to-late stage development.  The company's pipeline is strategically focused within its core therapeutic areas.

Allergan's innovative development-focused R&D organization places an emphasis on the strategic, late-stage development of important durable products that will drive long-term value, and on being the partner of choice for new and existing development collaborations.

Allergan expects to have double-digit topline growth, expanding operating margins and strong free cash flow.  Allergan expects to use a portion of the sale proceeds to pay down debt, including certain credit facilities and bonds.  The transaction is structured to maintain the existing bond issuer and guarantor structure and compliance with bond covenants.  Teva will not assume any of the bonds. Allergan remains committed to its investment grade ratings.

Beginning with its third quarter earnings report, Allergan will report its generics business as discontinued operations and expects to provide an updated 2015 forecast by mid-to-late September.

 
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