New York: Teva Pharmaceutical Industries Ltd struck a deal to acquire US specialty drugmaker Cephalon Inc for nearly $7 billion, topping an unsolicited bid by Canada’s Valeant Pharmaceuticals International Inc and boosting its brand-name drug business.
Teva’s $81.50-a-share deal is a nearly 12% premium over Valeant’s $73-a-share offer, which Valeant made public on 29 March.
Israel-based Teva is best known as the world’s largest maker of generic drugs, but it also has a significant business selling brand medicines that have patent protection. Adding Cephalon’s pain, sleep and cancer drugs will help Teva reduce its dependence on its big-selling Copaxone multiple sclerosis medicine, which faces increasing competitive threats.
The acquisition “down the road will reduce the impact of Copaxone on Teva,” said Natali Gotlieb, an analyst at the IBI Investment House. “Cephalon has a very interesting pipeline and the price seems fair.”
The deal is not conditioned on financing and is expected to be completed in the third quarter, the companies said. Teva expects the deal to immediately add to its non-GAAP earnings per share.
The transaction is worth $6.8 billion, including the conversion of Cephalon’s convertible debentures and stock options.
Cephalon had urged shareholders to rebuff Valeant’s overtures, and Cephalon shares had been trading above the Canadian company’s offer.
Cephalon shares rose 5.8% to $81.52 in premarket trading. Teva shares rose 3% after the announcement.
Cephalon chief executive officer Kevin Buchi said the deal with Teva followed a review of a wide range of strategic options.
“There’s always the possibility someone else could come in, but I think the likelihood of Valeant offering a higher bid is low, judging from the language they’ve used in the past,” said Jon LeCroy, an analyst at Hapoalim Securities. “I don’t see them coming back. Right now it looks like the Teva bid will stick.”
Teva has steadily built its business through acquisitions, including significant deals for generic drugmakers Barr Pharmaceuticals and Ratiopharm.
“They (Teva) paid too much when they bought Ratiopharm and I think they might be paying too much now but it makes sense to diversify away from the generic business,” said Gilad Alper, an analyst at the Meitav brokerage. “The profitability level is similar to Teva’s, which is good.”
Credit Suisse Securities LLC is serving as Teva’s financial adviser, while Deutsche Bank Securities and BofA Merrill Lynch are advising Cephalon.