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Teva Agrees to Buy San Diego’s Auspex Pharmaceuticals for $3B+

Xconomy San Diego — 

Israel’s Teva Pharmaceutical Industries (NYSE: TEVA) says today it has agreed to acquire San Diego-based Auspex Pharmaceuticals (NASDAQ: ASPX) in a cash deal valued between $3.2 billion and $3.5 billion.

The acquisition strengthens Teva’s core franchise in drugs for the central nervous system. Auspex, which became a publicly traded company just over a year ago, has been developing a deuterium-based analog of an FDA-approved drug for treating the hyperkinetic, involuntary movements characteristic of Huntington’s disease, Tourette syndrome, and tardive dyskinesia.

The deal is a huge win for investors Thomas McNerney Partners and CMEA Capital, which developed a new strategy for Auspex in 2007, and for Pratik Shah, the Thomas McNerney partner who stepped in as CEO in late 2013.

Auspex proved the value of its deuterium strategy in December, when the results of a late-stage clinical trial showed that its lead drug candidate clearly reduced involuntary movements associated with Huntington’s disease. At that time, Auspex said it planned to submit a new drug application for the compound, SD-809, in mid-2015.

In a joint statement this morning, Teva says is tending a cash offer for all outstanding Auspex shares at $101 per share, a 42 percent premium over Friday’s closing share price. According to Teva, that amounts to $3.5 billion in equity value and about $3.2 billion in enterprise value, which typically subtracts cash and cash equivalents from the market valuation, and adds debt, minority interest, and preferred shares.

Auspex venture shareholders include Thomas McNerney, CMEA Capital, Panorama Capital, Sloan Biotech Funds, BioMed Ventures, and Foresite Capital.

SD-809 also is in late-stage testing for treating tardive dyskinesia, a disorder for which there is no approved therapies, with results expected this year. Auspex says it also has deuterium-based analogs for treating idiopathic pulmonary fibrosis and Parkinson’s disease, and some 60 molecules in its patent portfolio.

SD-809 is a deuterium-based analog of tetrabenazine (Xenazine), a drug the FDA approved in 2008 for treating the involuntary movements, or “chorea,” associated with Huntington’s disease. But it is not widely prescribed because it has relatively high side effects and requires frequent dosing.

Deuterium is a stable and naturally occurring hydrogen isotope with a nucleus that is twice the mass of ordinary hydrogen. Replacing some hydrogen atoms with deuterium does not change the shape or electronic structure of a molecule, but the deuterium bonds are stronger. That means the drug is longer lasting and can be given in lower doses.