Teva wants Mylan wants Perrigo, and the pundits go mad with opinions

Rumors of a Teva-Mylan merger have swirled for weeks, and now that Teva's bid has actually arrived, the talk is heating up even more. Everyone has an opinion--Mylan ($MYL) and Teva ($TEVA) included--and those opinions are all over the map. Strategic or not? Legally possible or not? At what price might Mylan be willing to talk? And could Mylan persuade the reluctant Perrigo ($PRGO) to take its (defensive) $29 billion offer? Here are some of the conversations we're hearing:

  • One big question about a Teva-Mylan combo? Whether it would pass regulatory muster, given the two generics giants' overlapping businesses. Teva is trying to head that one off by asking the Justice Department and Federal Trade Commission to review its deal proposal now. Report

  • Mylan has spurned Teva's offer about as clearly and vociferously as a company could. Some analysts agree, namely BDO Capital Markets' David Maris, who's been against the idea since it was a popular rumor. Buying Mylan doesn't make strategic sense for Teva, he told FiercePharma last month. For one thing, that deal wouldn't help Teva much in emerging markets, which it's targeted for growth, he said. Report

  • Meanwhile, Teva is talking up the deal to its own employees. In a letter distributed Monday, CEO Erez Vigodman laid out Teva's rationale--scale, geographic reach, technology, commercial infrastructure, and so on. How can employees help? Put their heads down and power through--and refer all questions to corporate PR. SEC filing

  • Other pharma-watchers think Mylan's "we-don't-fit" defense is bogus. "We believe the deal makes strategic and financial sense for Teva," Leerink's Jason Gerberry said in a Tuesday note, saying that the numbers add up even at a higher price. "Additionally, we believe Teva's synergies estimates may prove conservative and there could be potential upside to the deal through additional cost-cutting and revenue synergies," Gerberry wrote. And Teva's estimates were already big--they add--up to $2 billion.

  • Teva should keep an eye on Mylan's mood, Cannacord Genuity analysts wrote in their Tuesday note. A "vicious attack" would suggest Mylan doesn't want to be bought at any price (at least not by Teva). A "more tepid rejection" would signal it's open to a higher bid. Teva is "in an awkward position" for several reasons, they said: One, it's gone public; two, it will need to be aggressive to finish it; and three, it also needs to be disciplined about price.

  • Mylan's objections go beyond the size of the bid, Bernstein analyst Ronny Gal figures. That means Teva would need to tango on Mylan's terms: "These terms would include high price, shared management and perhaps some employee protection," Gal figures. Would Teva's execs do such a thing?

  • Price could make a big difference to Mylan's attitude, of course. "At what price would Mylan cave?" the Cannacord Genuity analysts asked in their Tuesday note. Gal figures Mylan's asking price at $90 per share, $8 more than Teva's current bid--and if the money's there, Mylan's could soften up about its other terms. "Obviously, if the price is high enough, all other concerns are less critical," he wrote.

  • Teva may be confident about sailing through antitrust scrutiny, but the deal is already scaring some folks. Pharmacists, for instance, are saying the combo would further boost generic prices--which have already been rising. As Bloomberg notes, Walgreen Boots ($WBA) cut its 2016 profit forecast partly because of generic prices. Vermont Sen. Bernie Sanders, who has asked the Department of Health and Human Services to investigate rising generic prices, said this when asked about the Teva-Mylan combo: "Market consolidation and less competition in the industry is a possible factor we need to take a look at." Report

  • Last but not least, does Mylan have a chance at snagging Perrigo to stave off Teva's advances? Mylan will have to come back with an offer bigger than its current $29 billion bid, which Perrigo rejected Tuesday evening. If Perrigo continues to refuse its advances, Mylan's going to have one less excuse not to tango with Teva. Report

Special Reports: Top 10 generics makers by 2012 revenue - Mylan - Teva | Pharma's top 10 M&A deals of 2014

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