Will Teva's $6 Billion Offer Be Another "Swing And Miss" For Cipla?

After two unsuccessful attempts to take over India’s Cipla Ltd. since 2012, Teva Pharmaceuticals is upping the ante with a $6 billion offer, LiveMint reported last week.

Teva, one of the world’s largest off-patent drugmakers, could see profits of $31 billion by 2015. However, the company is also putting plans in place to reduce costs by $2 billion in the next two to three years. So why the big takeover offers?

According to an anonymous source connected with the offer, Cipla is an ideal fit; Its large manufacturing base in India boasts the world’s cheapest location for generic drug manufacturing, and the company hasa strong market presence in India and other emerging markets. Another key is Cipla’s global presence for respiratory drugs. In fact, its 2015 revenue goal is up to $2.4 billion in that market segment alone.

“Teva always prefers to buy a controlling stake in a targeted company, and will potentially buy the entire 36.8 percent promoter stake in Cipla, in addition to making the mandatory open offer to pick up another 20 percent stake from the public, at a premium of at least 20% on the existing market value,” the unnamed source explained to the Live Mint.

In the meantime, Cipla is pursuing its own ventures, announcing its acquisition of a 14.6 percent stake in the U.S.-based Chase Pharmaceuticals Corporation on Monday. In a company announcement, the drugmaker said it will shell out $1.5 million initially through its wholly owned subsidiary Cipla (EU), UK. Chase is an early-stage drug development company focused on developing new approaches for treating Alzheimer's disease. Cipla will not only finance Chase’s efforts, but will also help develop the drug. Once certain research milestones are reached, Cipla plans to invest $4.6 million more. When it’s all said and done, it will be a $21 million two-phase finance strategy that “will support Phase 2a and Phase 2b clinical trials for Chase’s lead drug CPC 201.”

Cipla hopes to provide low-cost access to Chase's lead drug in areas such as India and South Africa, where the company has a rich history of providing affordable access to essential and life-saving medications.

“This investment is consistent with Cipla New Ventures’ mission to build more innovation-led business streams for Cipla in the future,” Subhanu Saxena, MD and global CEO, Cipla Ltd said. ”We want to bring affordable medicines, where we identify an unmet patient need, in a way that leverages Cipla’s formidable technology, device, and development capabilities.”

However, when asked if Teva’s offer is still on the table, a Cipla global spokesperson added that they don’t have plans to sell out,  therefore “haven’t considered any of the proposals.”