Mylan dismisses takeover interest from Teva Pharmaceuticals

Israel's Teva Pharmaceuticals is considering a bid to acquire rival generic drugmaker Mylan even as the $33bn US company has said it wants to remain independent.

The generic drugmaker based on the outskirts of Tel Aviv has hired bankers to explore a potential bid, people familiar with the matter said. Teva has a market capitalisation worth $66bn.

Teva's interest in Mylan had been speculated about by analysts ever since the Pennsylvania-based company made an unsolicited $28.9bn offer for Perrigo, an Irish-based maker of cough medicines and allergy remedies.

Ronny Gal, an analyst at Bernstein, said last week that he suspected that Mylan's offer for Perrigo was designed to discourage Teva from making an approach.

On Friday afternoon, Mylan dismissed the benefits of a possible takeover by Teva after Bloomberg and the Wall Street Journal reported that the Israeli company was exploring a bid.

"Mylan is fully committed to its standalone strategy, including its proposal to acquire Perrigo, and today's speculation has no impact whatsoever on this strategy," said Robert Coury, Mylan's executive chairman.

"Such a combination [with Teva] is without sound industrial logic or cultural fit," he added. "Further, there would be significant overlap in the companies' businesses and we believe that it is unlikely that any such combination could obtain antitrust regulatory clearances."

However, Mr Coury concluded that "should any party make an actual offer to acquire Mylan, the board would carefully consider it".

Shares in Mylan rose 4.5 per cent on the news reports, while Teva's stock was up 2.2 per cent. Perrigo was flat.

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Analysts have expected further deals after Erez Vigodam, chief executive, described last month's $3.2bn all-cash takeover of Auspex Pharmaceuticals of the US as a "first major step" towards boosting growth.

Pressure for a big deal intensified this week when the US drug regulator gave the go-ahead for the first generic competitor to Copaxone, Teva's best-selling product.

The green light from the Food and Drug Administration for a copycat version of the multiple sclerosis medicine from Novartis of Switzerland and its US partner Momenta Pharmaceuticals puts at risk the $3.1bn of sales generated by Copaxone in the US last year - 15 per cent of the group's total revenues.

A Teva-Mylan tie-up would add to the frenetic pace of pharmaceuticals dealmaking so far this year, with $72.9bn of mergers and acquisitions among drugmakers in the first quarter, more than double the amount in the same period last year, according to Mergermarket.

Both Teva and Mylan are big rivals of Actavis, whose prolific M&A activity over the past year has catapulted it into the top tier of global pharmaceuticals manufacturers.

Liav Abraham, analyst at Citigroup, said the turnround efforts of Mr Vigodam, who was appointed last year, remained intact despite the challenge to Copaxone. He added that Teva could find new growth from "a string of smaller branded and generic acquisitions".

But Ms Abraham acknowledged that investor focus on "a material transaction" would increase after the FDA decision.

Mylan in February moved its tax domicile to the Netherlands after completing its $5bn acquisition of overseas assets from Abbott Laboratories of the US in a so-called "inversion" deal intended to lower the company's corporate tax rate.

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