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Acquisition Limbo Begins for Three Major Generic Drugmakers: TEVA, MYL, PRGO

Teva Pharmaceuticals Industries Ltd (ADR) (NYSE:TEVA) has made an official and unsolicited bid for rival generic drugmaker Mylan NV (NASDAQ:MYL), offering $82/share in a combination of cash and stock that values the smaller company at about $40 billion. Mylan is in the middle of its own acquisition effort, with a $29 billion unsolicited bid for Perrigo Company plc Ordinary Shares (NYSE:PRGO) going public in early April.

MYL got a bump in mid-April when rumors began to circulate that Teva might step up to make an offer, spurred by Mylan’s Perrigo attempt. Mylan took the rare step of commenting publicly on the rumors on April 17:

Mylan Executive Chairman Robert J. Coury commented, “We note that there has been some media speculation with regard to a potential bid for Mylan by Teva and that this rumor has been circulating for some time. Although it has been company policy not to comment on such media speculation, given current circumstances, we believe it is appropriate to do so now.

Mylan is fully committed to its stand-alone strategy, including its proposal to acquire Perrigo, and today’s speculation has no impact whatsoever on this strategy.

We have studied the potential combination of Mylan and Teva for some time and we believe it is clear that such a combination is without sound industrial logic or cultural fit. Further, there would be significant overlap in the companies’ businesses and we believe that it is unlikely that any such combination could obtain anti-trust regulatory clearances.

Investors and analysts aren’t confident that – even if Mylan acquiesces – a deal can get done based on U.S. antitrust laws. And, our suspicion is that $82 won’t take the cake. Mylan has made clear that they intend to fold in PRGO and continue the stand-alone strategy, and public commentary has been less-than-favorable about Teva.

Teva is making a concerted effort to shore up its own pipeline and reassure investors that growth is intact; the FDA approved the first generic form of the company’s blockbuster multiple sclerosis treatment, Copaxone, just last week. Teva’s most recent acquisition was the CNS drug developer Auspex Pharmaceuticals Inc (NASDAQ:ASPX) at $3.2 billion in March.

TEVA traded higher with the Mylan news on Tuesday morning.

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