Teva trumps Endo's offer for patchmaker NuPathe. Is a bidding war next?

Endo Health Solutions ($ENDP) thought it had made a deal for NuPathe ($PATH). Just a few weeks ago, Endo CEO Rajiv De Silva announced the buyout, his third since taking the helm at the troubled drugmaker. But now, Teva Pharmaceutical Industries ($TEVA) has swooped in with a higher bid.

Endo's agreement involves $2.85 per share up front, with $3.15 per share in additional milestone payments that could take the total up to $220 million. According to an SEC filing, Teva's bid also includes $3.15 per share's worth of milestones, but $3.65 million in up-front cash. That's $114 million to Endo's $105 million.

In both cases, the milestones depend on NuPathe's migraine treatment patch Zecuity, approved by the FDA early last year. Under Teva's offer, if the patch hits certain sales targets--$100 million to $300 million by its 9th year on the market; $450 million by its 12th--NuPathe shareholders reap the benefits. Analysts have pegged Zecuity sales at $181 million by 2018, about 6 years in.

NuPathe also has a pipeline of potential treatments, including another migraine treatment, as well as drugs for Parkinson's disease and schizophrenia.

Endo needs NuPathe to help it rebuild after the loss of patent protection on two key drugs, Opana ER and Lidoderm. De Silva has already unveiled a $325 million restructuring, including 700 job cuts, and earmarked at least some assets for sale. Plus, Endo is in something of a buy-or-be-bought situation, since key shareholder Fidelity Investments started agitating for a sale early last year. De Silva has already made two deals since his arrival: the generics maker Boca Pharmacal, which Endo bought for $225 million, and Paladin Labs, a $1.6 billion deal that helped take Endo into a tax-advantaged Irish domicile.

But Teva might need NuPathe's sales more: Its multibillion-dollar blockbuster and best-seller, the multiple sclerosis drug Copaxone, goes off patent in May, 18 months ahead of schedule. The company expects to lose up to $550 million in sales to generic competition. Teva is scrambling to cope with the earlier-than-expected loss, with plans to cut 5,000 jobs and $2 billion in costs. It's also in the throes of an overhaul at the top, after CEO Jeremy Levin decamped in October amid a squabble with the board.

Since Endo inked its deal in mid-December, NuPathe's share price has swelled by 40% and gained another 30% in premarket trading today, to $4.39. Will Endo come back with a higher offer?

If De Silva really wants NuPathe, he'll have to; already, NuPathe's board has "determined that the Teva proposal is reasonably expected to lead to a superior proposal," the SEC filing states. The board voted unanimously to negotiate with Teva on a potential deal.

Meanwhile, however, the NuPathe board's recommendation that stockholders tender their shares to Endo remains in force. We'll see how long that lasts.

- read the SEC filing
- get more from Reuters

Special Report: Top 10 Generics Makers by 2012 Revenue - Teva | Top 10 Drug Patent Losses of 2014 - Copaxone

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