1. Teva bid opens $2 bn window for Indian pharma Mylan

Teva bid opens $2 bn window for Indian pharma Mylan

On Tuesday, Israel-based pharma company Teva announced an unsolicited offer to buy Mylan...

By: | Published: April 23, 2015 12:31 AM

On Tuesday, Israel-based pharma company Teva announced an unsolicited offer to buy Mylan for $40.1 billion in a cash-and-stock deal. Even though Mylan’s management wants to remain independent, the deal is expected to create a combined entity with over 40% market share across at least 40 products with a total market size of $4 billion in the US.

“The US FTC seems likely to approve the merger on the condition of divestment of products in which the combined entity has a monopolistic position. Our 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 which would have to be divested,” say Ambit Capital’s pharmaceutical analysts Aditya Khemka and Paresh Dave in a research report.

The forty products, with a total market size of $4 billion MAT sales, imply primary sales of $2 billion after the exclusion of distributor margins.

According to the report, the likely merger would provide Indian generic firms the maximum products to bid for and potentially expand their presence in the US market.

“The biggest beneficiary from this potential merger would be Lupin and Torrent Pharma, both of which have a presence in only two products out of the 40 that could be potentially divested,” the report said.

For example, Fenofibrate, used to treat high cholestrol levels, has a total market size of $858 million. Teva and Mylan account for 43% of the market. Sun Pharma and Torrent Pharma do not sell this product.

Similarly, Tolterodine Tar Er’s market size is pegged at $270 million, wherein Teva and Mylan have a combined market share of 100%. Sun Pharma, Lupin, Cadila and Torrent do not sell this product.

Indian generic companies, such as Sun Pharma, Lupin, Torrent Pharma and Cadila Healthcare, have been open to acquisitions to expand their global footprint.

Company executives say the ongoing consolidation in the industry is likely to present interesting opportunities for companies that have strong balance sheets and superior supply chain matrix.

Increasing contribution of US sales, from 18% in FY09 to 33% in FY14, helped companies improve profitability by tapping into first-to-file opportunities and foray into limited competition products.

Between 2009 and 2014, Indian pharmaceutical companies have monetised opportunities arising from rising healthcare costs and blockbuster drugs going off patent in the US market, registering growth in sales from $1.4 billion in FY09 to $5 billion in FY14.

Positive side-effects?

Ambit Capital research says 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 which would have to be divested.

The forty products imply primary sales of $2 billion after the exclusion of distributor margins.

The biggest beneficiaries of this potential merger would be Lupin and Torrent Pharma, both of which have a presence in only  two products out of the 40 that could be potentially divested, the report said.

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Tags: Mylan
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