(Reuters) - Amneal Pharmaceuticals LLC is buying peer Impax Laboratories Inc in an all-stock deal as it looks to add heft to its generics business and gain an edge in a tough drug pricing environment.
The deal comes at a time when speedy aprovals of generic drugs by U.S. regulators has ratcheted up competition in the sector, mounting pressure on smaller generic drug makers such as Impax that lack bargaining power.
The combined entity will become the fifth-largest generics business in the United States, the companies said on Tuesday.
Reuters reported in March that Impax had asked investment bank Morgan Stanley to help it conduct a strategic review to cope with the competitive drug pricing environment.
Impax’s shares, which more than doubled in value after the report, slumped about 15 percent to $16.95 in morning trading on Tuesday.
Cantor Fitzgerald analysts said in a client note that the deal increases the likelihood that Impax CEO Paul Bisaro could transform the mid-size generics drug maker into a leading generics and specialty pharma company.
Amneal Holdings’ members will own 75 percent and Impax shareholders 25 percent of the new company’s pro forma shares. Bisaro, who was formerly an executive at Allergan Plc, would be the chief executive of the new publicly listed entity.
The combined company will have a diverse pipeline with more than 300 products either filed with the FDA or in active stages of development, Cantor analysts said.
The deal, which is expected to close in the first half of 2018, would add to Impax’s standalone adjusted earnings in the first 12 months, and generate double-digit revenue and earnings growth in the next three years.
“This growth profile is better than what we expect for Teva Pharmaceutical Industries Ltd and Endo International Plc given headwinds facing those businesses in 2018,” Cantor analysts added.
As part of the deal, privately held Amneal will sell 46.8 million unregistered common shares at $18.25 per share to generate proceeds of $855 million.
J.P. Morgan Securities is Amneal’s financial adviser, while Latham & Watkins LLP is its legal adviser.
Morgan Stanley provides financial advice to Impax, while Sullivan & Cromwell LLP is its legal adviser. Impax also received advice from BofA Merrill Lynch.
Reporting by Manas Mishra and Divya Grover in Bengaluru; Editing by Martina D'Couto