Executives at Teva Pharmaceutical Industries Ltd., the world’s biggest producer of generic drugs and Israel’s largest publicly traded company, have been hinting that they’re preparing to make an exceptionally large acquisition, Bloomberg reported.
Last month, Teva CEO Erez Vigodman said he was shifting to an “inorganic growth” strategy, meaning getting new businesses through mergers, acquisitions and takeovers.
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This led to a flurry of analytic research by the experts, to identify Teva’s likely purchase targets, followed by incredible investor interest in the company, which drove the stock price to a five-year high.
The popular view is that Vigodman has to get some big deal soon, to overcome generic competition to Teva’s best-selling Copaxone (fighting multiple-sclerosis), which brings in close to half of the company’s profits.
The U.S. Supreme Court set September as the time when the floodgates open and cheap Copaxone knockoffs start pouring into the market. So, it’s tictoc, tictoc, for Teva.
Bloomberg quotes Teva executives who say the company is looking at 25 targets, and the deal that stuns the world would either be one giant purchase or a sereies of smaller ones.
“Our strong focus during 2014 was on getting our house in order first, solidifying the foundation, developing the cylinder that will fire for us in years to come, ” Vigodman said recently. “We are reorienting the direction during 2015 towards inorganic moves as well.”
With more than $10 billion in debt capacity, a JPMorgan Chase & Co. report suggested md-March that Teva could go for Mylan Inc., or St. Louis, Missouri-based Mallinckrodt Plc.
But then, a better strategy might be to seek smaller, specialty drug makers, or drug companies in emerging markets, Bloomberg suggested, citing a MO Capital Markets analyst.
All of that acquisition hoopla may still not be enough to rescue Teva from the inevitable drop in its stock value come September. With so much of the company’s business depending on a product that goes generic, it’s bound to suffer until it reinvents itself.
Erez Vigodman is definitely racing against time.