Drug maker tied to Vegas hepatitis outbreak to buy Allergan unit for $40.5B

TEL AVIV — Teva Pharmaceutical Industries, the international drug maker linked to the 2008 hepatitis C outbreak in Las Vegas, has agreed to buy Allergan Plc's generic drugs business for $40.5 billion in a cash and stock deal that will turn the Israeli company into one of the world's largest pharmaceutical firms.

The deal, the largest in Israel's corporate history, prompted Teva to drop its $40 billion hostile bid for Mylan, which used a poison pill-style defense to fight the takeover.

It also will allow Dublin-based Allergan, which combined with generics maker Actavis earlier this year in a $66 billion deal, to focus on branded drugs and pay down its debt.

Allergan is the third-largest generic drug maker in the United States and is seen as a better fit than Mylan because it will improve Teva's distribution channels, allow access to profitable injectable drugs and provide a presence in India.

Pressure has been growing on Teva, already the world's biggest generic drug maker, to find new revenue sources to combat the start of competition this year for its multiple sclerosis drug Copaxone. Copaxone accounts for about half of Teva's profit.

In February 2012, Teva Pharmaceuticals agreed to pay $285 million to settle most of the lawsuits arising from the hepatitis C outbreak tied to the Endoscopy Center of Southern Nevada and its sister clinics. Teva and drug distributor Baxter Healthcare Corp. were found liable for making and selling oversized vials of the anesthetic propofol despite knowing that the vials were improperly used on multiple patients and caused blood-borne diseases to spread.

The companies had argued that the vials were clearly marked for single-use only and that the doctors and nurses were to blame.

County health officials linked the outbreak to the facilities run by Dr. Dipak Desai, who is serving a prison term of life with the possibility of parole after 18 years on various state and federal convictions.

The Teva acquisition of Allergen is the latest in an unprecedented wave of healthcare deals since the start of 2014.

Teva will pay $33.75 billion in cash and $6.75 billion in shares, representing a 10 percent stake in the Israel-based company, Teva said in a statement. The deal is expected to close in the first quarter of 2016.

Review-Journal writer Steven Moore contributed to this report.