Teva Pharmaceutical (TEVA) Finalizes Asset Sale to Clear Allergan Generic Portfolio Purchase

Shares of Teva Pharmaceutical Industries Ltd (TEVA) were trading down -1.61 or -2.99 percent to $52.26 per share in Friday’s premarket after news broke late yesterday that the company was finalizing as much as $2 billion in asset sale agreements to clear its acquisition of Allergan Plc’s (AGN) generic drug portfolio with U.S. regulators.

Teva Pharmaceutical stock closed at $53.87, up +0.04 or +0.07 percent in Thursday’s regular trading session.

Stock Analysis

Founded in 1901, Petah Tikva, Israel based Teva Pharmaceutical Industries Ltd. was originally a wholesale distributor in Jerusalem known as Salomon, Levin and Elstein Ltd. The company has grown into the world’s largest generic drug manufacturer, as well as a provider of active pharmaceutical ingredients and proprietary pharmaceuticals. The company is one of the top 15 pharmaceutical companies in the world with facilities in North and South America, Europe and Israel. Teva shares are dually listed on the Tel Aviv Stock Exchange and the New York Stock Exchange.

According to a source familiar with the matter, Teva is in the process of finalizing approximately $2 billion in asset sales to get antitrust clearance from U.S. regulators for the company’s $40.5 billion acquisition of Allergan Plc’s generic drug portfolio. In March, Teva said that the regulatory review by the U.S. Federal Trade commission was taking longer than expected. Nevertheless, the transaction is still anticipated to be completed by June.

The divestiture of assets that could be worth as much as $2 billion, includes about 50 drugs already on the market, as well as another 25 drugs currently in development. The drugs in development are for the treatment of diseases ranging from central nervous system disorders and cancer to respiratory disease.

Teva agreed to purchase Allergan’s generics portfolio in July of 2015, a move that would further solidify Teva’s position as the world’s largest producer of generic pharmaceuticals. In addition, the divestiture would provide Allergan with ample funds for further acquisitions and to focus on its name brand products.

Allergan subsequently agreed to be taken over by Pfizer for $160 billion.  However, the deal fell through last month after the U.S. Treasury took measures to limit so-called “inversion deals”, where U.S. based companies were acquired by foreign companies and relocated abroad for tax advantages.

The $2 billion in divestitures by Teva may or may not satisfy U.S. regulators. The FTC has on occasion made demands for the divestiture of additional assets or rule that a transaction is anti-competitive. Nevertheless, the transaction has already been approved by European regulators.

Teva is still looking for a buyer for another set of assets: a collection of drugs in different stages of development with an approximate value of $500 million. According to the source, which remains anonymous due to the private nature of the talks, a sale of those assets could happen as soon as next week.

Neither company commented on the matter. Both Teva and Allergan stocks are selling off in the premarket, with Teva down -3 percent and Allergan down -1.1 percent.

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Published on May 6, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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