Teva Acquires Taiyo - Analyst Blog

Teva Pharmaceutical Industries Ltd. (TEVA) recently acquired Japanese company Taiyo Pharmaceutical Industry Co. Ltd. for $934 million in cash.

The company used available funds and bank debt to finance the deal.

Deal to Strengthen Teva’s Presence in Japan

The deal is in-line with Teva’s strategy of becoming a major player in the Japanese generics market. Taiyo, which posted sales of $530 million in 2010, is the third largest generic pharma company in Japan. Taiyo’s portfolio consists of more than 550 generic drugs.

With this deal, Teva expects to deliver sales of $1 billion in Japan ahead of its 2015 target. The Japanese market, which is the second largest pharma market in the world with sales of $96 billion in 2010, has a relatively low rate of generic penetration. With the Japanese government working on increasing generic penetration from 23% to 30% by 2012, the market represents huge commercial potential for generic players like Teva.

Teva has been pretty active on the deal-making front over the past few quarters. So far in 2011, the company has struck several deals, including the upcoming acquisition of biopharma company, Cephalon, Inc. (CEPH). The Cephalon deal will not only strengthen Teva’s pipeline, it should also help the company achieve its goal of increasing its branded revenues from $4.6 billion in 2010 to more than $9 billion in 2015.

Once the acquisition goes through, the combined company’s branded product portfolio will consist of more than 20 products representing sales of about $7 billion. Cephalon also has a presence in the generics market following its April 2010 acquisition of Mepha AG, which specializes in the marketing of branded and non-branded generics and specialty products in more than 50 countries.

We currently have a Neutral recommendation on Teva, which carries a Zacks #3 Rank (short-term “Hold” rating).

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