Israel-based pharma company Teva's unsolicited bid to buy Mylan is likely to create a combined entity with over 40% market share, across 40 products at least, with a total market size of $4 billion in the US, say analysts who track the sector.
On April 21, Teva announced an unsolicited to buy Mylan for $40.1 billion in a cash-and-stock deal.
Trade pundits predict that the merger of Teva and Mylan could eventually result in the fourth largest pharmaceutical company by revenue worldwide. They also say that Teva's offer at $82 a share, which is 23% above the closing price of Mylan's share on April 21, may be too attractive an overture for Mylan to resist.
"Analysis suggests that the combined entity would have a dominant market share in 40 products with a total market size of $4 billion moving annual total (MAT) sales," say Ambit Capital's pharmaceutical analysts Aditya Khemka and Paresh Dave in a report.
This bid from Teva would quash an unsolicited bid by Mylan earlier this month to acquire Perrigo for $28.9 billion.
Teva's senior officials said its bid amounted to superior value for Mylan shareholders compared with Mylan's approach to Perrigo. "The deal would provide Mylan stockholders with the opportunity to participate in the significant upside potential of the combined company - one that would transform the global generics space, and leverage it to hold a unique leadership position in the pharmaceutical industry," said Erez Vigodman, chief executive of Teva.
Analysts note that the companies will have to divest dozens of overlapping products, if the deal has to clear antitrust hurdles. "There are at least 40 overlapping products between Teva and Mylan including top-selling drugs like Fondaparinux and Celebrex," said Antique Stock Broking Ltd analyst Hitesh Mahida.
However, Teva CEO Erez Vigodman's letter to Mylan's Executive Chairman Robert J. Coury indicated that Teva could clear any regulatory obstacles by getting rid of overlapping products.
Good for Smaller Indian Generic Companies
Experts in India say that the deal could be positive for smaller Indian generic companies who will be able to grab the products vacated by the combined entity. On the other hand, large-scale Indian generic pharmaceutical companies such as Sun Pharmaceuticals and Lupin could face much more competition, as the merged Teva and Mylan will focus its energies on bigger generic products.
The proposed deal could also have an impact on Indian companies such as Natco Pharma Ltd and Biocon Ltd. "Natco has partnered with Mylan to launch a 20 mg generic version of Copaxane, a multiple sclerosis drug with $4.2 billion in sales in 2014. This represents 21% of the Teva's overall revenue and 50% of its profits. The deal between the two foreign generic powerhouses could mean Natco will be forced to look for another partner," said an analyst in India.
The deal could also affect Biocon, which has partnered with Mylan for development and marketing of four biosimilar insulin products.
Mylan has a large manufacturing and sales presence in India, where it is bigger than Teva. Mylan, which started its Indian journey by buying Matrix Laboratories in 2007, has got manufacturing capabilities in finished dosage formulations and active pharmaceutical ingredient in the country. With the acquisition of Agila Specialties in 2013, Mylan expanded its global injectable platform by adding six additional injectable facilities in India. Mylan in February announced the acquisition of specialty women's health care company Famy Care Ltd with $750 million.
However, Teva has miles to go to make the proposal a reality, as there were many hurdles for such an acquisition in the past.