Mylan shareholders recoil after $7.2B deal for Meda

Corrections and clarifications: An earlier version of this story misstated Pete Letendre's title.

Investors reeled Thursday after pharmaceutical giant Mylan announced a deal to acquire Swedish drug company Meda for cash and stock worth $7.2 billion.

The combined company would have more than 2,000 products, including brand-name drugs, generics and over-the-counter medicines, in more than 165 countries. One of Mylan's best-known products is the EpiPen, an epinephrine injection to treat anaphylaxis, a potentially life-threatening allergic reaction.

Perrigo shareholders reject Mylan's hostile $26B takeover bid

After the deal was revealed, shares of Mylan traded in the U.S. plunged and eventually closed down 18% at $41.42. Analysts and experts said shareholders balked at the price.

"It's a pretty sizable premium they're paying," since Meda's sales and earnings before interest, taxes, depreciation and amortization are expected to grow only 3% and 5% annually over the next several years, says Jeffrey Loo, a health care equity research analyst at S&P Global Market Intelligence. "The growth rate for Meda is not that exciting."

Mylan is targeting Meda — which had $2.3 billion in revenue and about 4,500 employees in 2015 — after its recent $26 billion attempt to take over generic drug manufacturer Perrigo collapsed.

"Investors are saying they don't want $7 billion taken out of (Mylan's) coffers," adds David Dawley, director of the Robbins Center for Global Business and Strategy at West Virginia University. Dawley says investors may also be worried because 70% of cross-border acquisitions don't succeed.

Meanwhile, Meda stockholders applauded the accord, driving up shares traded in Stockholm by 70% to $17.41 just before 8 a.m. ET. Meda's largest shareholders, Stena Sessan Rederi AB and Fidim S.r.l., which collectively own 30% of the company, have already agreed to accept the deal. General shareholders will be given the chance to vote.

Mylan and Meda hope to complete the deal by August, and the combined company would have $11.8 billion in revenue based on 2015 results and $3.8 billion in earnings before taxes, interest, depreciation and amortization.

Mylan said the deal would provide a critical route into the over-the-counter drug market and certain foreign markets where the company does not currently sell its products. "We believe Mylan is uniquely positioned in the global pharmaceutical space today, with very strong fundamentals and a long and successful track record of executing on all previous acquisitions and organic opportunities," Mylan Executive Chairman Robert Coury said in a statement.

The acquisition may make strategic sense over the long term, analysts and industry observers say. By acquiring Meda, Loo says Mylan is able to grow its geographic footprint, moving into China, Russia and Southeast Asia and expanding in Europe. Meda's significant specialty drug and over-the-counter business are also attractive, Loo says.

"It makes sense for them," adds Pete Letendre PharmD, chief business officer for Pharmacy Consulting International in Florida. "Mylan is considered (largely) a generic house with a few branded drugs and a limited presence outside the U.S....They want to access these (other) markets."

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey. Follow USA TODAY reporter Laura Ungar at @laura_ungar.