Israel’s Teva Pharmaceutical Industries has entered an agreement with Allergan to acquire its generic drug unit Allergan Generics for around $40.5bn.

Under the deal, Teva will pay $33.75bn in cash and provide $6.75bn worth shares to Allergan, representing an estimated under 10% ownership stake in Teva.

The acquired business is expected to transform Teva’s global generics space through expanding its generics pipeline, R&D capabilities, operational network, supply chain, global commercial deployment and infrastructure.

Teva president and CEO Erez Vigodman said: "Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products, both in generics and specialty as well as the intersection of the two."

Under the deal, Teva will acquire Allergan’s Actavis global generics business that include the US and international generic commercial units and third-party supplier Medis.

"This transaction will accelerate Allergan’s evolution into a branded growth pharma leader."

The acquisition will also include global generic manufacturing operations, global generic R&D unit, international over-the-counter (OTC) commercial unit, (excluding OTC eye care products) and some established international brands.

Allergan continue to hold its global branded pharmaceutical and medical aesthetic businesses, as well as its biosimilars development programmes and Anda distribution business.

Allergan president and CEO Brent Saunders said: "This transaction will accelerate Allergan’s evolution into a branded growth pharma leader, enable a sharpened focus on expanding and enhancing our global branded pharmaceutical business and strengthen our financial position to build on our proven track-record of value creation led by effective capital deployment."

The deal is expected to complete in the first quarter of 2016, subject to customary closing conditions.

Image: Teva to purchase generic drug unit from Allergan. Photo: courtesy of Piyachok Thawornmat/