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Teva-Allergan deal may divest products worth $600 million

Thursday, Aug 27, 2015

As Israeli drugmaker Teva readies to acquire Allergan as part of its recent $40.5-billion deal, a large bounty of products is expected to be up for grabs for generic drugmakers.

According to collated data, products worth nearly $600 million may be needed to be divested as part of the anti-trust regulations of the US Federal Trade Commission. "In the next few weeks, the process may be initiated," an investment banker told ET.

Analysts said that while global generic players may look at cornering these products, large Indian drugmakers such as Dr Reddy's, Sun Pharma, Lupin, Zydus Cadila, CiplaBSE 2.51 % and Strides could figure among the bidders at least in the initial rounds.

Nearly 80 products, with a market size of close to $4 billion, are expected to be hived off from the acquisition in a deal pegged at $2 billion.

"Indian companies have taken enabling resolution of $6 billion over the past 12 months and hence are well positioned to bid for these products," Aditya Khemka and Paresh Dave of Ambit Capital wrote in an August 26 analyst note.

Some top products that might be divested from the deal are anti-asthma drug Budesonide, Risedronate, which is used to improve bone metabolism, and the antibiotic drug Clarithromycin.

Indian drugmakers are shedding in an investor call in July, also confirmed that it would look at a "basket of products" to grow in the US. "We believe that any consolidation, be it Teva-Allergan or Hikma transaction, will bring in significant opportunities for companies like us, to acquire certain products that may come to the divestment," Arun Kumar, managing director of Strides Arcolab, said during an analysts call last month.

Kumar further said that being a nascent player in the US market, Strides would like to acquire a basket of products rather than cherry-pick. their conservative approach towards inorganic growth as competition in legacy generic products, coupled with large mergers and acquisitions, some of them hostile in nature, are pushing them to rethink their US plans, analysts said.

However, barring a few top firms, most Indian companies will be constrained by financial capabilities to participate in large deals, a person familiar with the matter said.

Dr Reddy's, in particular, has expressed its intent to go after the products to be divested after the Teva-Allergan deal. Strides Arcolab, said during an analysts call last month. Kumar further said that being a nascent player in the US market, Strides would like to acquire a basket of products rather than cherry-pick.

 

economictimes.indiatimes.com

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