Teva Reinforces Leadership Position in CNS with Acquisition of Auspex
News Apr 02, 2015
Teva Pharmaceutical Industries Ltd. and Auspex Pharmaceuticals, Inc. have announced that they have entered into a definitive merger agreement under which Teva will commence a tender offer for all of the outstanding shares of Auspex at $101.00 per share in cash, representing total consideration of approximately $3.2 billion in enterprise value and approximately $3.5 billion in equity value.
This transaction is expected to enhance Teva’s revenue and earnings growth profile and strengthen its core central nervous system (CNS) franchise with the addition of Auspex’s portfolio of innovative medicines for people who live with movement disorders. The transaction has been unanimously approved by the Boards of Directors of both Teva and Auspex, and key shareholders of Auspex have entered into agreements indicating their support for the transaction.
Auspex is an innovative biopharmaceutical company specializing in applying deuterium chemistry to known molecules to create novel therapies with improved safety and efficacy profiles. Its lead investigational product, SD-809 (deutetrabenazine), which leverages Auspex’s deuterium technology platform is being developed for the potential treatment of chorea associated with Huntington’s disease, tardive dyskinesia, and Tourette syndrome, with a pharmacokinetic profile that allows for lower doses resulting in a favorable safety profile.
In 2014, Auspex reported positive results from its Phase 3 clinical trial for SD-809 in Huntington’s disease, with plans to submit a New Drug Application (NDA) for this indication by mid-2015. SD-809 has been granted orphan drug designation for the treatment of Huntington's disease by the United States Food and Drug Administration (FDA), and Auspex expects regulatory approval and commercial launch for this indication in 2016 in the United States. Topline results for Auspex’s Phase 3 ARM-TD study of SD-809 as a potential treatment for tardive dyskinesia, a disorder for which there are no approved therapies, are also expected in mid-2015. Other pipeline candidates include deuterated versions of pirfenidone for idiopathic pulmonary fibrosis and levodopa for Parkinson’s disease. Auspex has an additional 60 molecules in its patent portfolio.
• Excellent strategic fit - strengthens Teva’s leadership position within CNS and expands presence into underserved movement disorder markets
• Teva’s existing capabilities and infrastructure in CNS are expected to accelerate the potential for SD-809 and Auspex's additional pipeline assets
• Near-term value creation - SD-809 for Huntington’s disease is expected to be approved and launched commercially in 2016
• Deep pipeline and proven deuterium chemistry technology supports multiple platforms for growth
• SD-809 is currently in Phase 3 for tardive dyskinesia and Phase 1 for Tourette syndrome
• SD-560 (deuterated pirfenidone) is currently in development for idiopathic pulmonary fibrosis
• Additional candidates identified for deuterium chemistry platform that are aligned with Teva’s strategy
• Enhances Teva’s mid to long-term revenue and earnings growth, profitability, and product diversity - expected to be accretive to non-GAAP EPS beginning in 2017 and meaningfully accretive thereafter, and diversifies Teva’s Specialty medicines product mix
"The acquisition of Auspex is a significant step in strengthening Teva’s leadership position in CNS and advances us into underserved movement disorder markets. We look forward to accelerating the development and commercialization of the Auspex portfolio based on our infrastructure, capabilities and strong commercial and R&D position in CNS. As we have outlined recently, 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,” said Erez Vigodman, President and CEO of Teva.
“We believe that the application of Auspex’s deuterium platform to known pharmaceuticals holds great promise across a wide spectrum of neurological diseases and associated movement disorders, including Huntington’s disease, tardive dyskinesia and Tourette syndrome. Auspex’s lead candidate, SD-809, offers compelling efficacy and safety benefits to patients, as demonstrated by the impressive Phase 3 topline data in Huntington’s disease announced in December 2014,” said Michael Hayden, MD, PhD, Teva’s President of Global R&D and Chief Scientific Officer. “Teva is well positioned to realize the robust IP potential of these investigational products with Auspex’s deuterated technology which could represent a significant breakthrough for patients who often have no sustainable symptom relief from their disease.”
“Teva has established itself as a global leader in CNS diseases, characterized by strong management and commercial execution," said Pratik Shah, Ph.D., President and CEO of Auspex. "Importantly, the Teva organization has a commitment to patients that matches our own in developing and commercializing treatments for patients who suffer from movement disorders. This transaction will enhance Auspex’s mission by bringing innovative therapies to patients across the world as quickly and efficiently as possible. The transaction also marks a great outcome for Auspex shareholders and stakeholders as it not only validates our portfolio of drug candidates while delivering significant financial return, but it also puts our programs into the hands of a company that has the experience and commitment to deliver our pipeline of therapies to patients in need.”
Financial Benefit to Teva
The acquisition of Auspex is expected to generate value and enhance Teva’s mid to long-term revenue and earnings growth profile. Teva expects the transaction to begin contributing to revenues in 2016 with the anticipated launch of SD-809 for Huntington’s disease and to be accretive to non-GAAP EPS beginning in 2017 with minimal dilution to non-GAAP EPS in the second half of 2015 and 2016. The transaction is expected to be funded with cash on hand and is not subject to any financing contingencies.
Under the terms of the merger agreement, an affiliate of Teva will promptly commence a tender offer to acquire all of the outstanding shares of Auspex’s common stock for $101 per share in cash. Following the successful completion of the tender offer, Teva 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. The tender offer and withdrawal rights are expected to expire at 12:01 a.m., New York City time on the 21st business day after the launch of the tender offer, unless extended in accordance with the merger agreement and the applicable rules and regulations of the Securities and Exchange Commission.
The consummation of the tender offer is subject to various conditions, including 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. Pending such closing conditions, Teva expects the transaction will close in mid-2015.
Goldman, Sachs & Co. is acting as the exclusive financial advisor to Teva and Goodwin Procter LLP is serving as legal counsel to Teva. J.P. Morgan Securities LLC is acting as the exclusive financial advisor to Auspex and Cooley LLP is serving as legal counsel to Auspex.