Teva to buy Allergan generics for $40.5 billion

Israel’s Teva Pharmaceutical Industries will pay $40.5 billion in cash and stock for Allergan’s generic drugs business, solidifying Teva's position as the world's leading maker of generics.

Teva said Allergan would receive $33.75 billion in cash and Teva shares valued at $6.75 billion, giving it a 10% stake in Teva.

Allergan says the deal will allow it to focus on branded drugs, paying down debt and potential "transformational" acquisitions.

Allergan CEO Brent Saunders, who led Actavis’s purchase of Forest Laboratories and then Allergan, said the company will use the $36-billion in net proceeds from the generics sale to help fund further large acquisitions.

“We can accelerate our timing on transformational M&A,” Saunders said during a conference call. He cited aesthetics, eye care, central nervous system disorders and gastrointestinal therapies as areas for potential future deals. Wall Street analysts speculated that possible targets include Biogen Inc., Amgen Inc. and AbbVie Inc.

The combined business will command more than 20% of the global generics market, according to market intelligence firm Evaluate Ltd., cited by Reuters. Even with an estimated $500 million in forced divestitures, according to Evercore ISI analyst Umer Raffat, Teva would still control one-fifth of generic drug volume, giving it greater clout in negotiating with governments and health insurers.