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Published on : Apr 22, 2015

In the booming market for pharmaceuticals, deal-making it something that is either like being eaten or to eat others. This is the case with US$82 per share cash and stock bid of Teva Pharmaceuticals for the generic competitor Mylan, which is a direct challenge to  almost US$30 billion takeover bid of Mylan for Perrigo that unveiled on April 8, 2015.

However, the big question is that if the board of directors of Mylan and the stockholders of the firm will cast their vote for Teva Pharmaceuticals, a firm which has seen its stock underperform dramatically in the S&P 500 Index during the period of previous 5 years, or whether they will maintain their support towards the management team headed by the CEO of Mylan, Mr. Heather Bresch. This team has driven around 250% share price rise since the start of 2012 and outperformed the 66% return of S&P.

During the previous 2 years, the tax-advantaged enterprises have been purchasing up assets, specifically generic drug manufacturers and those whose treatments are not subjected to a patent expiration, providing the investors the promise of big synergies and a swift payback on deals. The Valeant Pharmaceuticals introduced the drug manufacturing units’ race with an outbreak of deals, and most recently enterprises such as Perrigo, Mylan, Actavis, and Shire have all gone through their own stints of deal making.

The bankers and investors stitching together the consolidation wave argue that mergers permits drug manufacturers to operate more effectively and with better tax bills, assisting them to meet an estimated drop in global healthcare costs, which have increased far faster than the inflation.