Teva Pharmaceutical Industries Ltd.seems to have outbid a number of rivals to win Mexican drugmaker Representaciones E Investigaciones Medicas SA de CV, or Rimsa, for $2.3bn cash, a move which will bolster the Israeli generics giant's presence in Latin America and position it for further acquisitions in that fast growing region.

One of the top pharmaceutical manufacturers in Mexico, Rimsa has a big portfolio of specialty drugs and a core focus on developing fixed-dose combination products. Rimsa had revenue of $227mn in 2014, with an annual growth rate of 10.6% since 2011. [See Deal]

Already a strong player in Chile and in Peru, Teva is growing its business in Argentina but has a relatively small business in Brazil which it wants to grow further. The same situation applied to Mexico until now. With the Rimsa deal, Teva will become a leading pharma company there, the second-largest market in Latin America and one of the top five emerging markets in the world.

Teva last November served notice that it saw emerging markets as the next frontier, led by Latin American and Russia. That aim is shared by other big pharma groups and reflects the view that emerging markets are expected in general to grow at a faster pace than developed markets, due to improving access to health care services and rising income levels, which in turn should improve affordability. Also, as China's growth rate slows, destinations in Latin America will likely become more important for drugmakers searching for expanded business bases and sales momentum.

Teva CEO Erez Vigodman in a statement Oct. 1 said the Rimsa acquisition should complete in the first quarter of next year, and that it "delivers on our strategy of increasing our presence in key emerging markets in order to position Teva for long-term growth in these markets. He said Rimsa will give Teva a solid growth platform by combining Rimsa's strong brand, licensed portfolio of differentiated, patent-protected products, pipeline of promising drug candidates, valuable relationships with doctors, patients and health care providers and a strong commercial presence in Mexico.

Siggi Olafsson, Teva's head of global generic medicines, added that Teva "will build on Rimsa's brand reputation, successful sales force model, well-established commercial footprint and loyal customer base to introduce additional specialty and generic Teva medicines to patients in Mexico and across the region."

Analysts were generally supportive of the deal, although some thought the price was high.

Media reports circulating prior to the deal's announcement on Oct. 1 had indicated Rimsa was seeking a $1bn valuation and that a number of big pharma companies were keenly studying it, including Sanofi of France, Pfizer Inc. of the US and Takeda Pharmaceutical Co. Ltd. of Japan.

"It's plausible to assume that a competitive bidding process took place that pushed up the value of the asset," analysts at Jefferies said in a reaction note, adding: "We have long believed that Teva needed to increase its exposure to Latin America. Hence, the acquisition certainly makes sense strategically."

The hefty price tag might become better justified if the potential for cross-selling and cost synergies between the companies can be realized, analysts said.

Teva has been aggressively acquiring assets this year. In July, the Israeli group agreed to acquire Allergan PLC's global generic pharmaceuticals business under a cash and stock deal valued at $40.5bn and which is expected to close in the first quarter of 2016 ([A#00150803009]). In March it agreed to buy specialty pharma Auspex Pharmaceuticals Inc. in a deal worth $3.2bn ([A#14150330005]).

"We like management's recent execution on the M&A front and believe the company has done a nice job of bolstering its future growth outlook. And with a still relatively unencumbered pro forma balance sheet, we wouldn't be surprised to see similar sized acquisitions in the near to medium term," analysts at Jefferies said.

Teva Adds Needed Latin American Puzzle Piece With Rimsa Buy

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