Teva finally joins the M&A fray with $3.2B Auspex buyout

Teva CEO Erez Vigodman

Teva ($TEVA) has been sitting on the sidelines for more than a year as its peers jumped head-first into a biopharma deal bonanza. But no longer: The Israeli company struck a $3.2 billion agreement to buy Auspex Pharmaceuticals ($ASPX), which will finally put it back onto the M&A map. And it's zeroing in on more deal targets, analysts say.

The generics giant will shell out $101 per share in cash to buy California-based Auspex, it said Monday, a premium of more than 40% over the company's Friday close. The way the Petah Tivka drugmaker sees it, the transaction will bolster its top line next year and pad EPS beginning in 2017.

That's because of SD-809, a late-stage treatment for Huntington's disease that Auspex expects to roll out in the U.S. next year. That drug is also in Phase III testing for tardive dyskinesia, a movement disorder, and in Phase I for Tourette's syndrome--indications that would widen Teva's CNS footprint beyond multiple sclerosis star Copaxone. Auspex has an idiopathic pulmonary fibrosis treatment in the works, too.

"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," Teva CEO Erez Vigodman said in a statement.

As Bernstein analyst Ronny Gal pointed out in a Monday investor note, Teva has its own "complementary" Huntington treatment in the works. More importantly, Auspex's pipeline fits right in with Teva's R&D goals, he wrote: "The value created in this deal is basically in what Teva would do with the pipeline."

Meanwhile, Teva also has generics deals to consider. Vigodman has said repeatedly that the company is looking to a return to its copycat roots. That pledge has sparked much speculation that Teva could make a run at knockoffs rival Mylan ($MYL).

BMO's David Maris

But according to some analysts, such as BMO's David Maris, that particular deal isn't going to happen. Such a tie-up wouldn't make sense tax-wise, and it also wouldn't satisfy Teva's desire to beef up in emerging markets. Beyond that, Teva's debt capacity just isn't big enough to swallow Mylan, by Maris' calculations. Analysts who say a deal is plausible are "just putting out fluff," he told FiercePharma earlier this month.

That doesn't mean another "transformative" deal isn't in the works, according to a March 26 report from Sanford C. Bernstein seen by Bloomberg. Execs say they've whittled their list of preferred targets down to 25, analysts wrote, and those could make for a whopper transaction, or smaller branded pacts to string together after the Auspex buy.

- read Teva's release
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Special Reports: The top 15 pharma companies by 2014 revenue - Teva | Top 10 generics makers by 2012 revenue - Teva

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