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NuPathe Picks Teva as Merger Partner

NEW YORK (The Deal) -- Teva Pharmaceutical Industries (TEVA - Get Report) won a bid to purchase Malvern, Pa.-based NuPathe (PATH) with an offer that came in at only $9 million more than its M&A rival, Endo Health Solutions (ENDP - Get Report).

NuPathe said Tuesday it entered into an agreement with Teva for a tender offer in which Teva will make an up-front cash payment of $3.65 per share plus a contingent value right of $3.15 per share, dependent on sales of NuPathe's migraine drug patch Zecuity.

NuPathe needed a commercial organization to launch the drug, a single-use, battery-powered patch. Zecuity was approved by the Food and Drug Administration Jan. 17, 2013.

The bidding war for NuPathe is not surprising, considering analysts have signaled that specialty pharmaceutical companies will be in high demand as M&A candidates in 2014.

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Teva is "a recognized leader in the field of diseases of the central nervous system," NuPathe CEO Armando Anido said in a statement. "We believe that Teva is well-positioned to maximize Zecuity's potential."

Anido continued, "Teva's offer represents a premium of $0.80 per share (28%) over the upfront cash consideration offered by Endo, with equal contingent cash consideration."

MTS Securities LLC, advised NuPathe and rendered a fairness opinion. Morgan, Lewis & Bockius LLP provided legal advice. Kirkland & Ellis LLP represented Teva.

NuPathe had agreed in December to the Endo merger, which valued NuPathe's equity at $2.85 per share, or about $105 million. The deal included an additional contingent payment of as much as $3.15 per share, or about $98 million, based on Zecuity sales.

In announcing the decision to go with Teva, NuPathe said that it had terminated its agreement with Endo, and its board had withdrawn the recommendation that stockholders accept Endo's offer to acquire outstanding shares of NuPathe's common stock.

The deal carried a $5 million breakup fee.

Endo said in a statement Tuesday it believed the Teva deals would be good for NuPathe shareholders as it formally withdrew its offer. The rejected suitor's CEO, Rajiv De Silva, said the company would continue to look for other opportunities.

Teva entered its bid for the company Jan. 7. Its contingent cash payments, which will not be publicly traded, include $2.15 per share in cash on net sales of Zecuity of at least $100 million in any four consecutive calendar quarters. Plus, Teva will pay $1.00 per share on net sales of the drug of at least $300 million in any four consecutive calendar quarters. Both contingencies would expire on the 60th day after the ninth anniversary of the first sale of Zecuity.

Consummation of the tender offer is subject to a minimum tender of a majority of outstanding NuPathe shares and other customary conditions. Both boards have approved the merger.

The price of NuPathe shares declined about 7% on the news, trading midday in New York at $4.07 per share, down from their closing price of $4.38 on Friday.

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