Mylan increases its offer in merger tug of war

Cecil drug firm raises bid for Irish company

The generic drug industry’s mega-merger brawl advanced Friday as Mylan sweetened its offer for Irish-based Perrigo, while Israel-based Teva Pharmaceutical Industries reiterated that it remains “fully committed” to its unsolicited $43 billion proposal to acquire Mylan.

Mylan’s latest bid values its target at $227.33 per share based on Mylan’s closing stock price Friday. Mylan is offering to give Perrigo shareholders $60 in cash and 2.2 Mylan shares for each of their shares. That puts roughly a $31 billion price tag on the proposed acquisition.

Perrigo, which on Tuesday rebuffed Mylan’s informal offer of $205 per share, quickly spurned the second proposal, too.

Analysts have speculated that Mylan’s bid for Perrigo, which makes store-brand medications, is a defensive maneuver to discourage Teva from making an offer for Mylan. After weeks of rumors that sent Mylan shares higher, Teva officially offered Tuesday to acquire Mylan for $82 per share — half in cash and half in stock.

Mylan’s increased bid for Perrigo indicates it still wants to thwart Teva.

“[Mylan is] playing defense as hard as they can,” said Charlie Smith of Green Tree money manager Fort Pitt Capital.

The company’s shares rose $2.37 on Friday to finish at $76.06. Teva shares also advanced, climbing $1.16 to $64.41, while Perrigo shares fell $8.74 to $192.89.

Canaccord Genuity analyst Corey Davis said in an email that the stock movements reflect Perrigo’s rejection of Mylan’s offer and the fact that Mylan will sooner or later have to address Teva’s overtures.

“That’s why Mylan is up and also Teva is up because of the accretion from a potential Mylan deal,” Mr. Davis wrote.

Perrigo believes speculation about a Teva bid boosted Mylan’s share price beyond where it would have been absent the rumors. The company said Mylan’s new bid would really be valued at about $182 per share if it was based on what Mylan had been trading for in early March.

S&P Capital IQ analyst Jeffrey Loo said that if Mylan wants to remain independent, “They would have to complete the Perrigo deal, which would make them too big to acquire.” He expects Teva will come back with an improved offer for Mylan, something other analysts are anticipating as well. Mylan’s directors would have a duty to shareholders to consider a higher offer, Mr. Loo added.

Mylan, the world’s No. 3 generic drugmaker, reincorporated in the Netherlands this year to lower its tax bill but kept its executive and operational headquarters in Cecil. The company has annual sales of $7.6 billion. Teva, the top generics producer, has annual revenue of $20.3 billion and Perrigo has annual sales of $4.1 billion.

Either combination would raise antitrust issues at a time when congressional leaders, pharmacists and consumers are raising concerns about significant generic drug price increases.

Last fall, U.S. Rep. Elijah Cummings, D-Md., and U.S. Sen. Bernie Sanders, I-Vt., wrote letters to 14 generics companies, including Mylan and Teva, seeking information about drug prices and their reasons for raising prices.

After a November congressional hearing on the price hikes, the U.S. Department of Justice subpoenaed three drugmakers as part of an antitrust investigation. Two of those companies, Philadelphia-based Lannett and PAR Pharmaceutical of Chestnut Ridge, N.Y., also received letters from Mr. Cummings and Mr. Sanders.

In a statement Mylan issued Friday, chairman Robert Coury said the company is making “a hell or high water commitment to obtain U.S. antitrust clearance” to acquire Perrigo. Teva also is convinced it can structure a deal with Mylan that would win regulatory approval and has filed papers to begin the process of obtaining clearance from the Justice Department and Federal Trade Commission.

“The combination of Mylan and Teva wouldn’t come close to an antitrust violation in my view because there are still so many generic companies,” Mr. Davis said in an email.

He believes a Mylan-Teva combination could be approved if the companies divested overlapping products.

Morningstar analyst Michael Waterhouse said two drugs would be of particular concern. Mylan and other generics producers are close to launching drugs that would compete with Teva’s Copaxone, a brand-name multiple sclerosis treatment. And Teva is preparing to launch a generic version of Mylan’s EpiPen, a brandname drug used to treat breathing problems caused by allergies.