NEW YORK | Teva Pharmaceutical Industries Ltd. has agreed to buy Cephalon Inc. for $6.8 billion in a deal that would give the world’s largest generic drug developer a range of biotechnology drugs aimed at cancer and other conditions.
Teva, based in Israel, said Monday it will pay $81.50 per share cash, marking a 5.8 percent premium to Cephalon’s closing price Friday. The price is a 12 percent premium over the rejected $73-per-share offer from Valeant Pharmaceuticals International Inc. on March 29. The latest offer represents a 39 percent premium to Cephalon’s stock prior to Valeant’s unsolicited offer.
The Teva and Cephalon boards have each approved their proposed deal, which is expected to close during the third quarter.
Cephalon shares rose $3.24, or 4.2 percent, to $80.26 in afternoon trading. Teva’s U.S. shares rose $1.61, or 3.5 percent, to $47.34.
The combined company would have a portfolio of branded drugs with $7 billion in annual sales and more than 30 potential products in late-stage development.
“We are embarking today on a new and exciting future for Teva’s branded business, and we are delighted that we will be working together with the Cephalon team,” said Shlomo Yanai, president and CEO of Teva, in a statement. “This is transforming for Teva’s branded business, as it will help us to deliver on our strategic goal of creating a diversified, multifaceted company.”
The bulk of Teva’s revenue comes from generic drugs, but the company does sell several branded drugs, including the multiple sclerosis drug Copaxone and the Parkinson’s disease drug Azilect. Cephalon’s key drugs include the sleep disorder treatment Provigil and the cancer drug Treanda. The company has products aimed at a broad range of conditions including pain, cancer and central nervous system disorders.
Cephalon’s late-stage development products include potential cancer treatments, a tamper-resistant opioid painkiller, and an asthma treatment. The broad range of the pipeline and current products is a key part of Teva’s strategy of growing branded drug revenue to $9 billion by 2015.
“Cephalon’s merger with Teva is the result of a rigorous process that included a review of a wide range of strategic options undertaken by Cephalon’s board of directors and management team to maximize value and deliver significant returns to shareholders,” said Kevin Buchi, CEO of Cephalon.
On April 5, Frazer, Pa.-based Cephalon rejected Canada-based Valeant’s $73-per-share, or $5.7 billion takeover bid, calling the offer too low. Valeant then moved to make the offer directly to shareholders and nominated candidates for the Cephalon’s board.
In a statement on Monday, Valeant said it is withdrawing from its pursuit of Cephalon.
Teva said the Cephalon buyout will give the company’s earnings a boost within the fourth quarter of closing. Teva did not comment on any changes to management or the workforce, but said it expects to realize cost savings of at least $500 million in the third year after the close of the deal.
Citi Investment Research analyst John Boris said the deal makes both strategic and financial sense for Teva.
“Strategically, it lessens dependence on its multiple sclerosis franchise, supports its long-term strategy and financial targets, deepens its late-stage pipeline and expands its global generic footprint,” he said, in a note to investors.
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