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| BMO's David Maris |
Heard the Teva-Mylan takeover rumors? Forget them, one analyst says.
As BMO's David Maris told FiercePharma, there's "no source" for the buzz that a tie-up between the two generics heavyweights is in the works--and as far as he's concerned, analysts who say a deal is plausible are "just putting out fluff."
His rationale? First, there's Mylan's ($MYL) recent pickup of some of Abbott's ($ABT) declining European generics--a transaction that helped it complete a tax inversion. For Teva ($TEVA) to buy Mylan, he says, the Israeli company would either have to, a., bring Mylan to Israel--which wouldn't be tax-friendly; or b., complete an inversion itself and relocate to the Netherlands--which goes against Teva's bylaws.
Second, the way Maris sees it, buying Mylan doesn't make a whole lot of strategic sense. Teva has said it wants to focus in on emerging markets, and "this really doesn't give them that at all," he said. "Mylan bought the Abbott products to focus in on Europe--particularly France--and that's not an area Teva is interested in."
Also, Teva and Mylan are each working on a copy of the other's top seller--Teva's Copaxone and Mylan's Epipen--which would call for divestments in the event of a buyout.
Last--and perhaps most important--is that Teva's debt capacity just isn't big enough to swing a deal for Mylan, Maris figures. By the time you take Mylan's $22 billion-plus market cap and add a premium and its debt, "you'd be at $30 billion. They're not going to go to junk status" to finance a deal, he said.
Maris' observations follow months of takeover talk from industry-watchers--including Bernstein analyst Ronny Gal, who recently called a Teva-Mylan acquisition "reasonable," with a couple of caveats that made it a "close call" for the Petah Tikvah-based drugmaker.
But according to Maris, "this is something that analysts don't want to say, 'no, there's no deal,' because that's definite. They'd rather speculate and look up at the stars and make up a story that fits the stars like Ursa Major," he said.
Meanwhile, Gal himself may be backtracking. On Monday, he wrote in a note to investors that after reflecting on the topic, he believes "a near-term combination is unlikely." That said, "we see lots of money looking for deal opportunity in the sector," he wrote.
Special Report: Top 10 generics makers by 2012 revenue - Teva - Mylan | Pharma's top 10 M&A deals of 2014 - Mylan/Abbott Laboratories established products