Report: Investors concerned Teva overpaid for Allergan generics unit
- As Teva works to close its $41 billion deal for Allergan's generics business, some investors are growing concerned the Israeli drugmaker overpaid, reports the Financial Times.
- Already approved by regulators in Europe, the deal has been delayed by an ongoing review by the U.S. Federal Trade Commission. Both companies expect to win a go-ahead from the FTC sometime this month, although Teva will likely have to divest some assets.
- Since Teva struck its agreement with Allergan last July, the pharmaceutical industry has been rocked by strident criticism over high drug prices. While that should benefit generics drugmakers offering lower-cost options, several large investors cited by FT believe Teva may be betting on generic drugs at a time when that slice of the industry faces stiffer competition from Indian drugmakers.
As FT notes, when the deal was initially announced last summer, it was generally seen as a good move by Teva. Acquiring Allergan's generics unit would cement Teva's position as the world's largest generic maker, and help shore up revenue as its top-selling multiple sclerosis drug Copaxone faces patent expiry.
Teva has worked with regulators in Europe and the U.S. to alleviate any lingering antitrust concerns. At the same time, the generics maker launched a global rebranding effort aimed at making its medicines more recognizable worldwide.
In order for the European Commission to sign off on the deal however, Teva agreed to divest Allergan's generics business in the U.K. and Ireland, in addition to selling off 24 overlapping molecules in other E.U. countries.
But as the companies close in on winning final approval in the U.S., investors appear to be taking a harder look at the price Teva paid. Along with much of the biopharma market, Teva's shares have fallen by around 25% compared to last summer.
And the first three months of 2016 saw Teva's U.S. generics sales plunge by 32%, while global generics revenue dropped 17%.
Yet with larger scale from adding Allergan's drugs, Teva may be able to better win market share globally. And both companies have indicated their commitment to the deal. "We are excited to be in the final stages of completing the acquisition of Actavis Generics, which will enable us to further realize the enormous potential in the growing global generics universe," said Teva CEO Erez Vigodam in a recent statement on its first quarter results.
- Financial Times Teva investors fret over $41bn generic drugs deal