Rival's play puts ball in Teva court

Your move, Teva.

Mylan N.V.'s plan, announced Wednesday, to create a generic-drug giant with a $28.9 billion takeover offer for Perrigo Co. is raising questions about whether rival Teva Pharmaceutical Industries Ltd. will seek a transaction with either company or look elsewhere.

With a market value of more than $56 billion, Israel-based Teva, which has significant operations in the Philadelphia region, has been vocal about its appetite for acquisitions. Teva has entertained doing a large deal for a generic drugmaker but doesn't want to overpay, according to a person familiar with the matter who asked not to be identified.

The person said Teva chief executive Erez Vigodman was more keen on doing a series of smaller deals that either give him a new generic market in another region or country or new products that fit with its strategy to buttress its branded neurology and respiratory arms. For example, the $3.1 billion agreement last month to buy Auspex Pharmaceuticals Inc. gave Teva drugs that curb tics and other movement disorders.

Still, the whirlwind of deals in the pharmaceutical industry means companies often have to change direction, and it's possible the Mylan bid for Perrigo could prompt Vigodman to consider all his options.

Denise Bradley, a Teva spokeswoman, declined to comment.

Before Mylan announced its pursuit of Perrigo Wednesday, it had seemed a likely merger partner for Teva.

In fact, Chris Schott, an analyst at JPMorgan Chase & Co., discussed the idea in a research note sent to clients just hours before Mylan disclosed the Perrigo bid.

"The potential for a Teva-Mylan merger has been widely discussed over the past six months, and while we see Mylan with a solid path to value creation as a standalone company, the merits of such a transaction are hard to ignore," Schott said in the note. "This combined company would be by far the largest global generic manufacturer, with significant cash flows to redeploy towards more branded growth opportunities."

Mylan's move to go after Perrigo would make it tougher for Teva to acquire Mylan, since it would have to make a hostile bid, David Steinberg, an analyst at Jefferies Group L.L.C., said in a note to clients.

Mylan's legal domicile in the Netherlands also makes takeover attempts more difficult, he said.

Teva is "in a favorable position irrespective of a potential bid" for Mylan, Liav Abraham, an analyst at Citigroup Inc. in New York, wrote in a note to clients. He recommends buying the stock.

Combining operations with the Parsippany, N.J.-based Actavis P.L.C.'s generics unit may be preferable to acquiring Mylan, Abraham said.

Teva also may opt instead to focus on deals to replace brand-name drugs that are losing patent protection, rather than expand its generics operations.

Elizabeth Krutoholow, a Bloomberg Intelligence analyst, named Endo International, which is Ireland-based but operates out of Malvern and is valued at $16.6 billion, as among possible targets for Teva.