Bloomberg and the Wall Street Journal report that Dublin-based Allergan plc is in talks with Teva Pharmaceutical Industries Ltd. to sell its generic drug business. Citing people familiar with the matter, the deal could be announced as early as Monday and is valued at $40-$45 billion. Tel Aviv-based Teva has been aggressively pursuing the acquisition Mylan NV, another generic drug maker, for months; Teva is reportedly dropping its bid after Mylan last week used a foundation to thwart repeated attempts at a takeover—a Dutch version of a poison pill.

Today, Allergan said it will acquire Naurex Inc, a clinical-stage company focused on central nervous system disorders, for $560 million. Naurex is developing rapastinel, a novel once-weekly intravenous treatment for depression ready for Phase III trials.

Our Take: Allergan is a remarkable example of the meteoric rise of what was once a small generic drug maker, which began as Watson Pharmaceuticals: 

  • Watson Pharmaceuticals started in suburban Chicago in 1983; a decade later it went public.

  • In 2000 Watson reached the $1 billion mark after it acquired Schein Pharmaceutical Inc., another generics manufacturer. Over the next decade it acquired Andrx Corp., the Arrow Group, Eden Biodesign, Specifar Pharmaceuticals, Ascent Pharmahealth and finally, the Swiss generics company Actavis Group. Following the acquisition of Actavis in November 2012, it adopted the Actavis name.

  • In October 2013 it acquired Warner Chilcott plc and relocated its corporate headquarters to Ireland, while keeping a US presence in Parsippany, NJ.

  • Several more acquisitions led Actavis to become a hybrid generic and innovator pharmaceutical company: Forest Laboratories in July 2014 for $25 million in cash and stock, Rhythm Health in October 2014, and Durata Therapeutics in November 2014. In the same month it acquired Allergan in a cash and stock deal valued at $70.5 billion.

  • In June, Allergan entered into a definitive agreement to acquire KYTHERA biopharmaceuticals for $2.1 billion.

Earlier this year, the company said it would change its name from Actavis plc to Allergan plc, but will retain the Actavis name for certain regions and markets. Today, its market capitalization is $121 billion.

The flurry of activity from Allergan strongly suggests that it is moving to shed its generic roots and concentrate on discovery and the branded side of the business, particularly in elective dermatology, antiinfectives and CNS disorders.

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