Teva Pharm eyes more acquisitions after buying Allergan's generics business

By Steven Scheer

JERUSALEM (Reuters) - Teva Pharmaceutical Industries (TEVA.TA) will remain in the hunt for more acquisitions after completing a deal to buy Allergan's (AGN.N) generics business for $40.5 billion this week.

Teva expects to generate free cash flow of more than $25 billion through 2019 from the integration of Actavis, $5 billion of which will go towards dividend payouts.

"The rest will be divided between paying down debt and entertaining attractive specialty deals," Erez Vidogman, Teva's chief executive, told a conference call of analysts following the publication of second-quarter results.

The deal, announced in July last year and partly financed by bond offerings totalling more than $20 billion, solidifies Israel-based Teva's position as the world's No. 1 maker of generics. Teva this week also bought Allergan's Anda Inc distribution for $500 million.

It now seeks to expand further into the branded segment.

Its own blockbuster multiple sclerosis treatment Copaxone has 30 percent of the U.S. market, the company said. It expects to launch a drug to treat Huntington's disease next year.

In the second quarter, specialty drug revenue rose 9 percent to $2.3 billion.

Teva's generics drug revenue fell 7 percent to $2.3 billion, led by a 33 percent drop in the United States. But Copaxone recorded an 8 percent rise in sales to $1.1 billion.

The drug, which Teva said accounts for about 22 percent of revenue and 47 percent of its profit, faces competition. Sandoz, part of Swiss Novartis AG (NOVN.S), and Momenta Pharmaceuticals (MNTA.O) last year launched a once-daily 20 mg version called Glatopa, which had sales of $20.7 million in the second quarter.

To minimize the damage, Teva has been shifting MS patients from a daily 20 mg dose to a three times a week 40 mg and Teva's patent on the higher dosage is being challenged in court.

Sandoz and Momenta are vying for approval to sell such a version.

Teva holds five patents on Copaxone and believes they will be upheld. "Any generic launch prior to a final non-appealable court ruling on all five patents, which is not expected before the second half of 2018, would be at risk" to legal action, Vigodman said.

Teva posted earnings per share excluding one-time items of $1.25 per share, down from $1.43 a year earlier. Revenue grew 1 percent to $5.0 billion.

Vigodman said Teva's main focus would be on integrating Actavis but also on delivering on its operational and financial targets and on development and commercialisation of more than 35 products in its pipeline.

The company reaffirmed it expects 2016 revenue of $22-$22.5 billion and adjusted EPS of $5.20-$5.40. Last month it provided a financial outlook through 2019.

Teva declared a cash dividend of 34 cents a share for the second quarter, the same as the previous three months.

Its New York-listed shares were 1.2 percent higher in morning trading at $54.22.

(Additional reporting by Ari Rabinovitch; editing by Susan Thomas and David Evans)