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Teva to Acquire NuPathe

Zacks Equity Research

Shares of Teva Pharmaceutical Industries Ltd. (TEVA) gained 2.3% on Jan 21 after it announced that it has entered into a definitive agreement to acquire NuPathe Inc. (PATH) for $3.65 per share or about $144 million. The deal is expected to close next month.

The acquisition will add NuPathe’s migraine drug, Zecuity, to Teva’s portfolio. Zecuity is currently the only migraine patch approved in the U.S. for the acute treatment of migraine with or without aura in adults. Zecuity has demonstrated impressive efficacy and safety profile in phase III studies.

As per the terms of the deal, NuPathe stands to receive an additional $3.15 per share from Teva subject to the achievement of certain sales targets related to Zecuity. Teva will pay $2.15 per share if Zecuity reaches at least $100 million of net sales during any four consecutive calendar quarters on or prior to nine years of launch, which would increase by $1.00 per share if Zecuity reaches at least $300 million during the above-mentioned period.

Our Take

We are positive on Teva’s NuPathe acquisition. Being the only migraine patch in the market, its transdermal mode of administration will provide an edge over currently available oral drugs. We believe Zecuity possesses the ability to capture a share of the lucrative migraine market.

Teva has several programs in its pipeline with an increased focus on central nervous system (CNS) treatments. With this acquisition, Teva will have access to NuPathe’s proprietary technology (including the transdermal delivery system).

Endo Health Solutions Inc. (ENDP) was also looking to acquire NuPathe. Endo and NuPathe shares fell 1.71% and 7.53%, respectively, on the Teva-NuPathe news. We note that NuPathe shares had soared 35.6% on Jan 8 after Teva had initially expressed its interest in the company.

Teva carries a Zacks Rank #5 (Strong Sell). Other better-ranked stocks include Actavis (ACT) carrying a Zacks Rank #1 (Strong Buy).

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