Debt has been a key deal driver this year, particularly in the hospital sector, where Community Health Systems (NYSE: CYH), Quorum Health Corporation (NYSE: QHC) and Tenet Healthcare (NYSE: THC) are shedding less desirable assets. Joining them now is generic drug maker Teva Pharmaceutical Industries Ltd. (NYSE: TEVA), which is shouldering $35 billion of debt brought on by its $40.5 billion acquisition of Allergan‘s (NYSE: AGN) line of generics, announced in July 2015. The company hasn’t announced an acquisition since September 2016.
What a difference a year makes, as generic drug prices have been squeezed and the company has been selling off non-core assets to pay down its debt. In September 2017, Teva has annouced three transactions, all of them sales to other healthcare companies.
On September 11, Teva sold Paragard®, an intrauterine copper contraceptive, to CooperSurgical Inc., a wholly owned subsidiary of The Cooper Companies (NYSE: COO), for $1.1 billion cash. The price, which includes the manufacturing facility in Buffalo, New York, brought a revenue multiple of 6.5x.
At the time of the sale, Teva announced it was pursuing more divestiture opportunities, including the sale of its remaining assets in its global Women’s Health business, and its European Oncology and Pain businesses. As it exits those therapeutic areas, the company is sharpening its strategic focus on CNS (central nervous system) and Respiratory treatments as core global therapeutic areas.
A week later, on September 18, the company announced that London-based CVC Capital Partners, through its CVC Capital Partners Fund VI, was acquiring a portfolio of products within its global women’s health business across contraception, fertility, menopause and osteoporosis. The portfolio, which is marketed and sold outside of the United States, includes Ovaleap®, Zoely®, Seasonique®, Colpotrophine® and Actonel®, among other drugs. Combined annual net sales of the products within this portfolio for the full year 2016 were $258 million.
The all-cash transaction was valued at $703 million.
But wait, there’s more! In that same release, Teva announced that Foundation Consumer Healthcare, LLC, a pharmaceutical company owned by affiliates of Juggernaut Capital Partners and Kelso & Company, would acquire Plan B One-Step® and Teva’s value brands of emergency contraception, Take Action®, Aftera®, and Next Choice One Dose®. Combined annual net sales of these products for the full year 2016 were $140 million.
That deal was valued at $675 million.
Whats next for Teva? It’s still looking for a buyer for its European oncology and pain assets. In August of this year, rumors began swirling that Indian drug maker Intas Pharmaceuticals Limited was bidding for Teva’s women’s health, oncology and pain management divisions in Europe for $1.5 billion. If successful, the deal would be the largest cross border M&A involving an Indian pharma company. But from the looks of it, global private equity firms have the cash burning in their portfolios. Big Pharma is waiting to see what happens to the Trump Administration’s promised tax reform before they commit to any mega-deals. Stay tuned.
