Allergan announces plans to acquire Naurex Inc.

DUBLIN & EVANSTON, Ill.—Allergan Inc. and Naurex Inc., a clinical-stage biopharmaceutical company focused on transformative therapies for central nervous system disorders, have signed a definitive agreement by which Allergan will acquire Naurex for an upfront payment of $560 million net of cash acquired. Of that sum, $460 million is payable upon the close of the transaction, with the remaining $100 million payable by January 2016 (or upon closing if the deal has not closed by that time). Naurex could also receive R&D success-based and sales-threshold milestone payments.

"The acquisition of Naurex is a great fit for Allergan and a compelling and exciting investment. We expect Naurex will enhance Allergan's mental health portfolio and build on our strategy to lead in this important therapeutic area," Brent Saunders, CEO and president of Allergan, noted in a statement. "Naurex' unique pipeline comprises compounds that utilize a new mechanism to target areas of significant unmet medical need in Major Depressive Disorder, including severe and/or treatment-resistant depression. These highly differentiated compounds will immediately bolster our exceptional mental health pipeline."

With this acquisition, Allergan will gain several compounds, including Naurex' lead development product rapastinel (GLYX-13), a once-weekly intravenous Phase 3-ready molecule that has demonstrated rapid, robust and sustained efficacy in multiple Phase 2 clinical studies in depression, and NRX-1074, a next-generation drug candidate that in an intravenous form has shown rapid, robust antidepressant efficacy in a Phase 2 study.

"Our team at Naurex has been successful in bringing these two highly innovative treatments for depression through proof-of-concept clinical trials," said Norbert Riedel, Ph.D., president and CEO of Naurex, in a press release. "We recognized that Allergan's deep commitment and experience in mental health position them particularly well to progress these programs through further clinical development and into commercialization. This transaction also enables us to leverage our proven team and technology to continue innovating in this space through the spin-out of Naurex' platform and initiation of a research collaboration with Allergan, a credible and committed partner in the field."

In addition, Naurex' platform for discovering drugs that enhance synaptic plasticity will be spun-out into a new company immediately prior to the closing of the Naurex acquisition. Allergan will establish a research collaboration with the new company for the discovery and early development of innovative small-molecule NMDA receptor modulators for the treatment of specific psychiatric and neurologic disorders, and will have first right to in-license a set number of drug candidates that result from the deal for certain indications.

In other news for Allergan, the company announced a definitive agreement with Teva Pharmaceutical Industries Ltd. by which the latter will acquire Allergan's global generic pharmaceuticals business for $40.5 billion, to be paid by $33.75 billion in cash and $6.75 billion in Teva stock, which comes to roughly 10 percent ownership stake in Teva. Allergan will also retain 50 percent of Teva's future economics from generic lenalidomide (Revlimid). Both companies' boards of directors unanimously approved the transaction, with strong support from the respective management teams as well.

Teva will acquire Allergan's legacy Actavis global generics business, including the U.S. and international generic commercial units, third-party supplier Medis, global generic manufacturing operations, the global generic R&D unit, the international over-the-counter (OTC) commercial unit (excluding OTC eye care products) and some established international brands.

Teva expects significant accretion to non-GAAP earnings per share from the deal, including double-digit non-GAAP earnings per share accretion in 2016 and more than 20 percent accretion in years two and three following the closing of the deal (which is expected in Q1 2016). Excluding synergies, Teva forecasts that Allergan Generics will contribute roughly $2.7 billion in EBITDA next year. Pro forma sales of approximately $26 billion and EBITDA of approximately $9.5 billion are expected next year after the deal closes, with an estimated $11 billion in sales outside of the U.S. Approximately $1.4 billion in cost synergies is expected annually.

“This transaction delivers on Teva’s strategic objectives in both generics and specialty,” reported Erez Vigodman, president and CEO of Teva. “Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products – both in generics and specialty as well as the intersection of the two. Our respective portfolios of generic medicines and applications are highly complementary, providing Teva with high quality growth and earnings visibility, and the scale and resources to expand upon our specialty capabilities."

In the wake of this transaction, Teva has withdrawn its proposal to acquire Mylan N.V., noting that it “does not intend to continue to pursue a transaction with Mylan at this time.”