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Teva to divest women's health portfolio

By Katie Pfaff

Staff Writer

Coopersurgical has agreed to buy Teva Pharmaceuticals Industries Ltd.'s Paragard intrauterine device (IUD) for $1.1 billion in cash and is expected to close the deal late this year. The acquisition includes Teva's exclusive Paragard manufacturing facility in Buffalo, N.Y., and marks continued effort to divest Teva's global women's health business, according to the company.

Jerusalem-based Teva Pharmaceuticals shared the company is moving away from women's health and other select businesses to focus on central businesses.

"Today's announcement emphasizes our commitment to divest non-core businesses to ensure that Teva is even more focused and efficient in this rapidly changing and highly competitive environment," said Yitzhak Peterburg, interim CEO.

The company will focus instead on its CNS and respiratory core business. Teva will manage manufacturing and sales until the deal closes at the end of 2017.

"Teva continues to actively pursue additional divestiture opportunities, including the sale of the remaining assets of its global women's health business, as well as its oncology and pain businesses in Europe," said the company.

About $2 billion is expected from these sales and additional assets, and proceeds are planned to be used to "repay term loan debt under its senior credit facility."

Morningstar Equity Research commented on the sale, "After Teva's management highlighted the potential sale of its branded women's health division to help repair its balance sheet, we're not surprised to see Teva part ways with Paragard, the only nonhormonal IUD available in the U.S. We don't anticipate a change in our fair value estimates or moat ratings for either company as we incorporate the asset sale into our models. Cooper's $1.1 billion purchase price looks like a fair deal for Teva and marks an important first step in the company's efforts to reduce leverage and streamline operations, in our view."

Additional changes are expected after Teva's new CEO, Kare Schultz, begins to work with the company.

IUD device

The T-shaped plastic and coiled-copper wire Paragard IUD is placed in the uterus for long-term birth control through release of copper into the tissue. The plastic frame and copper create "a sterile inflammatory reaction," which makes the area toxic to sperm. The IUD is 99 percent effective and FDA approved for 10-year use. IUDs fall under pharmaceutical device regulations.

"Coopersurgical's commitment to women's health, fertility and diagnostics, will help to assure that patients in the U.S. continue to benefit from access to Pargard, said Peterburg.

Coopersurgical, part of The Cooper Companies Inc., of Pleasanton Calif., is expected to realize $0.70 to $0.75 accretive value to its earnings per share in the first year, as well as add to its operating and gross margins. Paragard accounted for $168 million in revenue for the 12-month period ending June 30, 2017.

Portfolio fit

"The Paragard IUD is the only nonhormonal IUD available in the U.S., and it's a perfect fit with Coopersurgical," said Robert Weiss, CEO, president and non-independent director, Cooper Companies, in an investor call Monday. "We have a long history of success with gynecologists, and this product is a great addition to our salesperson's bag. It further strengthens Coopersurgical's position in the gynecology space and allows us to leverage our domestic sales force and expand Paragard's reach."

". . . This acquisition will expand Coopersurgical's business in a large and growing segment of the contraceptive device market,' said Weiss. "Coopersurgical will now offer the only IUD on the U.S. market that is hormone-free, long-lasting and reversible." The U.S. IUD market is estimated to be worth about $1 billion and to grow at a single digit rate, according to Cooper. In the market landscape, only 16 percent uses nonhormonal IUDs, and Paragard is the only such device approved in the U.S., according to the company.

Sales team base

"Paragard has an established user base, both with large health systems as well as with gynecologists and so should allow for leverage across CSI's portfolio with both of those groups," said Robert Auerbach, former SVP and CMP, Coopersurgical, in Monday's call. "I should note that 100 percent of the sales are in the U.S., and although we're acquiring global rights, we'll evaluate the outside the U.S. strategy at a later time."

Anthony Petrone, CFA, equity analyst, Jefferies LLC, was in agreement the IUD would complement Cooper's business due to overlap in the channel, adding "more specifically Paragard fills the IUD product gap for CSI, which has a deep presence in surgical instrumentation for permanent female sterilization on one-end of spectrum and assisted reproductive technologies (IVF via Origio) on the other end of spectrum."

According to Cooper, currently 84 percent of the market is hormonal devices, which is led by Stillwater, Minn.-based Bayer Corp.'s Mirena IUD (97 percent of market), and Ireland-based Allergan plc's Lilleta IUD (3 percent of market).

"Currently, we know of one competitive product in the current study process that has an IND holder known as FHI 360, and they're currently enrolling patients for a phase III study," said Auerbach in the investor call. "They have estimated a study completion date of 2021, and this will be for an initial contraceptive efficacy of three years. Once the study completes and if it's successful, they would attach the study to an FDA application for a three-year indication of use."

Market potential

IUDs are less common in the U.S. (penetration of 10 to 12 percent) compared to Europe (15 percent) and Asia (30 percent), but are expected to grow in popularity at a rate of 3 to 4 percent a year in America, according to the company. The addition of IUDs also allows Cooper to leverage their existing relationships with gynecologists and to cross sell with current products, the firm shared in a presentation about the acquisition.

A bridge loan of $1.1 billion to Cooper will fund the sale. Cooper operates two business divisions, Coopervision and Coopersurgical, which includes women's health, diagnostics and fertility treatments. Teva focuses on specialty medicines such as CNS disorders, movement disorders, migraine, neurodegenerative diseases, pain management and respiratory treatment products.

Cooper undertook a series of acquisitions in recent years, most recently with New York-based Recombine, a genetic testing firm, in May 2016 for $85 million with undisclosed terms. Prior to that, the company purchased U.K.-based contact lens manufacturer, Sauflon Pharmaceuticals, for $1.2 billion in cash and stock in June 2014; Eden Prairie, Minn.-based medical device company, Inlet Medical, for an undisclosed amount in November 2005; and Concord, Calif.-based contact lens maker, Ocular Sciences Inc., for $600 million in cash in July 2004.

Published  September 13, 2017

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