ISRAEL’S TEVA WILL ACQUIRE CEPHALON PHARMACEUTICALS: Generic drug giant
to buy top biopharmaceutical firm
RUMPING A COMPETING bid, Israel’s Teva Pharmaceutical Industries has struck a deal to purchase Frazer, Pa.-based Cephalon for $6.8 billion. Last month, Cephalon’s board rejected a hostile bid from Canada’s Valeant Pharmaceuticals that was 10% lower. The merger with Teva is the result of a rigorous review by Cephalon’s board and management of ways “to maximize value and deliver significant returns to shareholders,” Cephalon CEO Kevin Buchi said in a May 2 statement announcing the deal. Teva and Cephalon have crossed paths before. In late 2005, they settled a patent infringement lawsuit after Teva agreed not to sell a generic version of Cephalon’s narcolepsy drug Provigil in Europe before October 2012. European antitrust authorities are now investigating the deal to see whether it unlawfully restricts trade. The U.S. Federal Trade Commission also is pursuing an antitrust case against Cephalon for its dealings with other generic drug makers. Known for its generics business, Teva is looking to strengthen its branded drug operations. In 2010, generic drugs accounted for about 68% of its $16.1 billion in sales. Cephalon—the sixth-largest biopharmaceutical firm, with $2.8 billion in 2010 sales—will boost Teva’s branded drug sales to about $7.4 billion. Central nervous system products will make up more than 60% of these sales, and Teva will expand into the oncology and pain markets. “This is transforming for Teva’s branded business, as
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it will help us to deliver on our strategic goal of creating a diversified, multifaceted company,” said Teva CEO Shlomo Yanai. Teva isn’t shy about large acquisitions, having spent about $21 billion over the past five years to acquire generic drug firms. Teva and Cephalon expect to realize $500 million in costsaving synergies over the next three years. Work will continue, however, on a combined drug development pipeline of more than 30 late-stage compounds plus three that are awaiting regulatory approval. “Cephalon’s pipeline includes numerous largepotential, but high-risk, assets,” Morgan Stanley stock analysts pointed out to clients in a report on the deal. They include Revascor, a stem cell therapy for congestive heart failure, and the lupus drug Lupuzor. But new products are needed because Cephalon faces patent expirations for Provigil. Buchi said Teva shares Cephalon’s commitment to new research-based products. In contrast, Valeant, which typically avoids that kind of risk taking, said it was interested only in Cephalon’s marketed products and made clear it would have disposed of the pipeline assets. Upon learning of the deal with Teva, Valeant withdrew its offer. Calling the deal positive news for Cephalon stockholders, Valeant CEO J. Michael Pearson said, “We are pleased that Teva has paid what we believe is a very full value for the company.” Valeant owns more than 1 million Cephalon shares, or about 1% of the company.—ANN THAYER
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NEWS OF THE WEEK
The narcolepsy drug Provigil is Cephalon’s biggest seller.
TECHNOLOGY Energy Department offers deep discounts on its patents For a bargain price of $1,000, start-up companies can get up to three of the thousands of unlicensed patents in the Department of Energy’s portfolio. The offer is part of the department’s America’s Next Top Energy Innovator challenge and is available until Dec. 15. The challenge kicked off last week and aims to double the number of startup companies emerging from DOE’s 17 national laboratories, which hold more than 15,000 patents. Only 10% of federal patents are currently licensed to be commercialized, according to the agency.
“Our goal is simple: unleash America’s innovation machine and win the global race for the clean energy jobs of the future,” said DOE Secretary Steven Chu in a statement. By simply submitting a business plan and signing a generic agreement, available as a template on the DOE website, interested start-ups can apply to license up to three patents from a single laboratory at the reduced $1,000 fee. Applying for a patent license usually costs $10,000 to $50,000 and involves months of paperwork. As part of the challenge, DOE will also make it easy for companies
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to conduct their commercialization R&D at the national laboratories. Patents that are up for grabs include a system from Lawrence Berkeley National Laboratory to convert solar energy to chemical and thermal energy for transportation purposes; semiconductor materials from the National Renewable Energy Laboratory that have potential applications in solar cells, solid-state lighting, and high-speed transistors; and a catalyst from Argonne National Laboratory that removes up to 85% of NOx emissions from diesel fuel combustion.— RAJENDRANI MUKHOPADHYAY
