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March 30, 2015

Teva to Acquire Auspex for $3.5B, Growing CNS Portfolio

  • Teva Pharmaceutical Industries will acquire Auspex Pharmaceuticals for about $3.5 billion, the companies said today, in a deal the buyer asserts will not only enhance its revenue and earnings, but strengthen its core central nervous system (CNS) drug portfolio.

    The deal has been approved by the boards of both companies, with key Auspex shareholders agreeing to support the acquisition by Teva, the companies said. The deal is expected to close in mid-2015, subject to a minimum tender of a majority of outstanding Auspex shares, the expiration or termination of any applicable waiting periods under applicable competition laws, and other customary conditions.

    Auspex specializes in treatments for movement disorders that apply the company’s deuterium chemistry to known molecules, which according to the company improves their safety and efficacy profiles. Auspex’ deuterium technology platform is being applied in the company’s lead investigational product, the NDA-ready SD-809 (deutetrabenazine), developed for the potential treatment of chorea associated with Huntington’s disease, tardive dyskinesia, and Tourette syndrome.

    Last year, Auspex reported positive results from its Phase III clinical trial for SD-809 in Huntington’s disease. Later this year, the company expects to report topline results for the Phase III ARM-TD study of SD-809 as a potential treatment for tardive dyskinesia, a disorder for which there are no approved therapies. The compound is also under Phase I study for Tourette syndrome.

    By mid-2015, Auspex said, it plans to submit an NDA for SD-809 for Huntington's disease, an indication for which orphan drug designation has been granted by the FDA. Auspex expects a U.S. regulatory approval and commercial launch in 2016.

    Other Auspex pipeline candidates include deuterated versions of pirfenidone for idiopathic pulmonary fibrosis (SD-560) and levodopa for Parkinson’s disease. The company has an additional 60 molecules in its patent portfolio, according to Teva and Auspex.

    "The acquisition of Auspex is a significant step in strengthening Teva’s leadership position in CNS and advances us into underserved movement disorder markets,” Erez Vigodman, Teva’s president and CEO, said in a statement.

    Teva named CNS (including multiple sclerosis, neurodegenerative diseases, and pain) as one of its two core therapeutic areas last October. The other core area is respiratory (including asthma and COPD). At the same time, Teva said it was retreating from two other core areas, oncology and women’s health treatments.

    “One of our key priorities for 2015 is to support Teva’s mid to long-term growth and create value for our shareholders with business development opportunities that are closely aligned with our core therapeutic areas. This transaction represents a first major step with regards to that commitment and we expect to continue this focus in the future,” Vigodman added.

    Teva said it will commence a tender offer for all outstanding shares of Auspex at $101per share in cash, representing about $3.5 billion in equity value but only $3.2 billion in enterprise value—defined as market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

    Following successful completion of that offer, Teva said, it will acquire all remaining shares not tendered in the tender offer through a second-step merger at the same price as to be paid to stockholders tendering their shares in the tender offer.

    Teva says it expects the acquisition to require minimal dilution to non-GAAP EPS in the second half of 2015 and 2016, be accretive to non-GAAP EPS beginning in 2017, and “meaningfully” accretive thereafter.

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