Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) shares reached as high as $83 per share in pre-market trading Monday, or over 18% higher than the stock’s closing price on Friday, as the firm announced that it will acquire Allergan, Inc. (NYSE:AGN)’s generic drugs business. Teva Pharmaceutical, the world’s largest generic pharmaceutical company, also announced that in light of the purchase of Allergan’s generics arm, it is quitting its quest to purchase Mylan Inc. (NASDAQ:MYL).
According to Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA), the deal worth $40.5 billion will give patients easier access to affordable medicines. Allergan, Inc. (NYSE:AGN) says the acquisition of its generic drug business will help them focus on the higher-margin and higher-profit branded medicines business. Under the deal, Allergan will be paid $33.75 billion in cash and $6.75 billion in Teva stock.
Allergan, formerly known as Actavis before the latter acquired it earlier this year and took on the Allergan name, will also retain 50% of Teva’s future economics from the generic drug lenalidomide (Revlimid®). Allergan expects $36 billion after taxes from the deal. This means that also taking into account the firm’s free cash flow, it expects to virtually erase its $42 billion in debt once the deal is completed. Meanwhile, the withdrawal of Teva’s proposal to acquire Mylan Inc. (NASDAQ:MYL) comes after the latter fought the offer saying that Teva is not interested in reinvesting money in the company but rather in returning money to shareholders.
The boost to Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) this morning also comes after it reported preliminary results that beat Wall Street expectations for the April – June quarter. The firm said that it earned $1.43 per diluted share, up 15% year-on-year and a beat of analyst expectations of $1.31 per share. Preliminary revenues for the quarter is $4.97 billion, according to Teva, also beating Wall Street expectations of $4.91 billion. Hedge funds appear to have anticipated the successive good news for Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) as they have been bullish on the company. Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) was included in 77 hedge funds’ equity portfolios at the end of March, an increase of 10 funds over the quarter. In addition, these funds held around $4.0 billion worth of stock, up by 5.4% on the quarter. However, the stock gained some 8.30% during the same period, which means that there was a slight outflow of capital.
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With this in mind, let’s take a closer look at hedge fund activity surrounding Teva Pharmaceuticals.