Endo buying NuPathe for $105m to launch Zecuity in 2014
This article was originally published in Scrip
Endo Health Solutions will pay $105m in cash for NuPathe and plans to launch the transdermal migraine drug Zecuity during the first half of 2014.
The transaction is a long time coming for NuPathe, which said in January that it would launch Zecuity in the fourth quarter of 2013 with the help of a partner after the US FDA approved its formulation of the popular migraine drug sumatriptan delivered by a battery-powered patch (scripintelligence.com, 18 January 2013). The return on investment for NuPathe's shareholders could more than double based on certain milestones, but only if Zecuity sales hit aggressive sales goals in the nine years after the patch's launch.
The NuPathe transaction is Endo's third acquisition this year following the $225m cash purchase of Florida-based specialty generics manufacturer Boca Pharmacal and the $1.6bn acquisition of the Canadian specialty pharma firm Paladin Labs announced in August and November (scripintelligence.com, 29 August and 6 November 2013). Endo didn't have to stray far from home to buy NuPathe, since both companies are headquartered in Malvern, Pennsylvania.
Endo gained 3.2% to close at $65.91 per share on 16 December following the NuPathe announcement, bringing its market cap to $7.6bn. The company is trading near the top of its range for the past year of $25.01 to $67.62, making big gains based on its dealmaking news with Boca and Paladin despite some setbacks in its pharmaceuticals business.
The FDA rejected the low-testosterone therapy Aveed from Endo subsidiary Endo Pharmaceuticals in May, but accepted a resubmitted new drug application (NDA) in September (scripintelligence.com, 6 September 2013). But between the two FDA actions on Aveed, the agency approved a generic version of Endo's pain drug Opana ER (oxymorphone hydrochloride extended-release) in July (scripintelligence.com, 15 July 2013).
NuPathe's investors sent the company's stock well above the Endo acquisition price on 16 December, giving the stock a 47.4% boost to close at $3.39 per share in hopes that Zecuity sales will leap over the high bar Endo set for the migraine patch.
An Endo affiliate will acquire outstanding NuPathe shares for $2.85 each, but NuPathe shareholders will receive $2.15 per share if Zecuity sales exceed $100m in a single quarter in the nine years following the migraine drug's launch. NuPathe shareholders could earn another $1 per share if Zecuity sales exceed $300m in a single quarter in the same period.
The deal terms assume at least $400m in yearly Zecuity sales on an annualized basis, which seems like a realistic goal since Sagient Research's BioMedTracker projects peak worldwide sales of $462.8m in 2020, but the analyst service's estimates suggest that the second milestone could be well out of reach for NuPathe investors.
Endo expects its $105m investment in NuPathe to be accretive to earnings next year following a Zecuity launch in the first half of 2014. If so, the company needs to sell more than $100m worth of migraine patches in the second half of the year to earn money in 2014 on the NuPathe deal.
"The acquisition of NuPathe enhances our branded pharmaceutical portfolio and is well aligned with our strategy of acquiring late-stage products for commercialization," Endo president and CEO Rajiv De Silva said in a statement from the company.
Endo will use its existing sales representatives for pain and migraine products to promote Zecuity. In addition to Opana, the Endo Pharmaceuticals sales force already markets the serotonin receptor agonist Frova (frovatriptan succinate) for migraines and Lidoderm (lidocaine patch 5%) for post-herpetic neuralgia.
Adding a new product to its portfolio with the NuPathe acquisition gives Endo an additional revenue generator in time to make up for some of the sales soon to be lost when Opana and Lidoderm face generic competition.