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Teva to Acquire MicroDose Therapeutx

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Teva Pharmaceutical Industries Ltd. (TEVA) recently signed a definitive agreement for the acquisition of a privately-held pharmaceutical and drug delivery company, MicroDose Therapeutx.

MicroDose focuses on inhalation technologies and products that help improve efficacy and compliance in patients suffering from lung diseases and infections. With this acquisition, Teva will gain access to MicroDose’s proprietary technology. This includes a multi-dose dry powder nebulizer device, which needs no preparation and can be administered in less than 30 seconds.

The lead candidate in MicroDose’s pipeline is MDT-637 which is being developed for respiratory syncytial virus (:RSV).

Per the terms of the agreement, Teva will pay $40 million to acquire all shares of MicroDose. Moreover, Teva may pay up to $125 million on the achievement of regulatory and development milestones as well as sales-based milestones and tiered royalties on the commercialization of MDT-637 and an earlier stage asthma/ chronic obstructive pulmonary disease (:COPD) candidate.

This deal is in line with Teva’s strategy of strengthening its position in the respiratory therapeutic area, which is one of the company’s core specialty franchises. Key marketed products in the company’s respiratory franchise include ProAir, Qvar and Qnasl Nasal Aerosol. However, competition is strong in the respiratory market given the presence of companies like GlaxoSmithKline (GSK) and AstraZeneca (AZN) among others. Sales from Teva’s respiratory products franchise declined 2.5% in 2012 to $856 million.

Teva currently carries a Zacks Rank #3 (Hold). The company is going through a tough transition period given fewer large generic opportunities, potential new competition for branded products (especially Copaxone) and a higher cost base.

However, we are encouraged by Teva’s plans to improve its position. Teva said that it intends to accelerate growth platforms, protect and expand core franchises, expand its global presence, pursue strategic deals and reduce the cost base. We expect investor focus to remain on the execution of the company’s new strategy.

Companies that currently look well-positioned include Biogen Idec (BIIB), a Zacks Rank #1 (Strong Buy) stock.

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