Teva's ($TEVA) $40.5 billion deal to buy Allergan's ($AGN) generics business ended its pursuit of Mylan ($MYL) and left its rival the chance to snap up its own hostile target, Perrigo ($PRGO). But the way some analysts see it, things won't necessarily go that way.
Leerink Partners' Jason Gerberry, for one, wrote in a recent note to investors that he doesn't see a combination between Mylan and Perrigo as likely, noting that Mylan's offer "in current form is insufficient." The way he sees it, the company would have to offer up about another 50 million shares to make an "acceptable" offer for its Irish target--bringing the bid to about $230 per Perrigo share--and he doesn't think Mylan has the "financial firepower" to make that happen.
Cowen & Co. analyst Ken Cacciatore also lamented Mylan's situation this week, opining in a note to clients that the company is persisting in "making wealth-destroying decisions." The potential Perrigo tie-up--on which investors will vote in late August--"does not appear to create any value at prices above $205," he wrote.
If Mylan doesn't land Perrigo, Gerberry foresees the newly Dutch company going after other assets, specifically in the specialty brands and differentiated generics areas. And even if it does, continuing to buy other companies will remain "the best way for them to grow," Peter Mathieson, Pittsburgh president of Fairview Capital, told the Pittsburgh Business Journal.
In the meanwhile, though, it may need to watch its back. Teva hasn't yet said what it will do with the 4.6% stake it built up in Mylan over the course of its hostile pursuit, and David Root, CEO of D.B. Root & Co., told the PBJ that it's "not out of the realm of possibility" that Teva could once again set its sights on Mylan after it folds in Allergan's business.
"I don't think Teva's interest will necessarily go away," he said, pointing to the rapid consolidation in the pharma industry. "A lot can happen in a year or two, and this is a game of musical chairs."
- read more from the PBJ
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