- US regulators on Wednesday cleared Israeli generics maker Teva Pharmaceutical's $40.5 billion acquisition of Allergan's generics portfolio, clearing the way for the deal to close after antitrust concerns had delayed final approval.
- Teva, now far and away the world's largest generics drugmaker, agreed to sell off 79 pharmaceutical products to 11 rival companies in order to secure the support of the Federal Trade Commission. Some of the divestitures had already been announced.
- With the deal complete, Teva will have a top-three commercial position in over 40 markets and expects to generate more than $25 billion in free cash flow over the next three years
Teva was already the largest generic drugmaker in both U.S. and global markets. The deal with Allergan will only bolster that position further, boosting the company's profile at the same time as it plans a global rebrand.
"The new Teva will be ideally positioned to realize the opportunities the global and U.S. generic markets offer," said Erez Vigodman, chief executive of Teva.
With the addition of Allergan's drugs, Teva will command a 22% market share in the U.S., according to the FTC. The regulator said the required divestitures would remove any competitive concerns, however.
"Although this merger combines two large sellers of generic drugs, the generic pharmaceutical industry as a whole remains relatively unconcentrated. Over two hundred firms sell generic drugs in the United States and the five largest suppliers account only for about half of overall generic sales," the FTC said.
Teva has 10 days to complete its planned divestments, which cover 79 drugs across a wide range of therapeutic areas. Several had already been announced in the run-up to the FTC's decision, including deals with Dr. Reddy's, Impax Labs and Mayne Pharma.
Sagent Pharma, Cipla, Zydus Worldwide, Mikah Pharma, Perrigo Pharma, Aurobindo Pharma, Prasco and 3M Company will also buy some of the specificied drugs.
Additionally, as Teva and Allergan also manufacture active pharmaceutical ingredients to other third-party drugmakers, the FTC is requiring Teva offer those other companies the option to enter into long term supply contracts. Such contracts would ensure third-party companies which buy APIs from Teva can't be squeezed if their finished products compete with Teva's drugs.
Teva said it would save $1.4 billion through 2019 in operational and tax synergies from the deal.
"The transaction strongly reinforces our strategy and yields very compelling economics. As a result, it opens a new set of possibilities for us in generics and specialty medicines," Vigodman said.
Teva did have take on new debt to finance the deal, selling $15 billion worth of bonds last week in one of the largest corporate bond offerings this year. But significantly higher free cash flows will allow the company to rapidly deleverage over the next three to four years, Teva said.