Teva acquires a company that develops a treatment for Tourette syndrome for up to 900 million dollars

Teva is acquiring Emalex Biosciences, which it says is developing a groundbreaking and first-of-its-kind treatment for Tourette syndrome, with the sellers receiving an immediate payment of $700 million in cash, with the option of additional payments of up to $200 million depending on meeting future commercial milestones, subject to FDA approval. The main development asset of the acquired company is Ecopipam, for the treatment of Tourette’s syndrome in children, and it is classified by the FDA as an orphan drug that is on a fast track towards approval.

The purchase will be completed in the third quarter of this year and Teva will finance it from the cash it has. The company updates that it will work to reduce the dilutive effect on the profit rate in the short term and confirms the achievement of its financial goals for 2027.

Richard Francis, President and CEO of Teva, said that “This is a clear implementation of our ‘Pivot to Growth’ strategy: the promotion of targeted deals and financial efficiency, which expand our backlog of innovative medicines that are in advanced stages and the backlog of products for marketing, with an uncompromising commitment to patients. There is a real medical need in the field of Tourette syndrome, and families deserve additional treatment options that help control symptoms while reducing side effects. Our in-depth knowledge of neurology puts us in an excellent position to promote the first experimental compound of its kind.”

In response to the purchase, Uri Hershkowitz, managing partner at the hedge fund Bennu Pharma, said that Teva is acquiring a company with a product ready to be submitted and launched next year, and the size of the product’s indication is huge – 175 thousand children in the US.

According to him, Tourette’s syndrome is currently treated with old existing products and it is difficult to derive the potential from them, but given the size of the indication, he estimates that it could be a large product worth a billion dollars. “It’s a positive development, and it’s good to see the company getting back into the acquisition game. On the face of it, the acquisition looks smart and one that the market will like,” Hershkovitz estimates.

beat forecasts in the first quarter

At the same time, the company published its first quarter reports in which it surpassed analysts’ forecasts. The company presented revenues of nearly $4 billion, a 2.3% increase from the corresponding quarter and higher than the forecasts of $3.79 billion, and Non-GAAP net profit per share amounted to 53 cents, 7 cents above market forecasts.

According to the forecast given at the beginning of the year, Teva is expected to record a certain decrease in revenues this year to 16.4-16.8 billion dollars, and to return to growth in the following years. Following the acquisition, Teva updates some of the parameters in the forecast, but leaves unchanged the revenue forecast and the free flow forecast which will reach 2-2.4 billion dollars this year. Non-GAAP net profit per share will amount to $1.91-2.11, compared to $2.57-2.77 in the previous forecast and excluding the purchase. Adjusted EBITDA (earnings excluding interest, tax, depreciation and amortization) will be $4.23-4.53 billion, compared to a previous forecast and results excluding the purchase of $5-5.3 billion.

As mentioned, the company plans to reduce the resulting dilution and states that the company’s board of directors instructed to examine a plan for the own purchase of shares – although at this stage no financial scope was given and the plan has not yet been approved.

According to generally accepted accounting rules (GAAP), in the first quarter Teva recorded a net profit attributable to shareholders amounting to $369 million, an increase of 72% from the corresponding quarter. Non-GAAP net profit amounted to $621 million, with the difference between the two figures due, among other things, to reductions of intangible assets, costs related to legal proceedings and reorganization expenses. The free flow in the quarter amounted to 188 million dollars. At the end of the quarter, the amount of debt was 16.6 billion dollars, 16% of which is defined as short-term debt.

Broken down by geographic regions, the market in the US presented revenues similar to the corresponding quarter of over $1.5 billion, with a drop in the area’s profitability from $518 million to $507 million. As expected, the company was hit by the decline in revenues of the significant generic drug Revlimid, an oncology drug that has faced fiercer competition starting this year. Accordingly, sales of generic products in the US fell by 28% to 612 million dollars, but the decrease was offset by a sharp increase in the sales of the original drugs, mainly Ostedo for the treatment of movement disorders.

In Europe, revenue rose 12% to $1.34 billion, but in local currency terms growth was 1%. Both generic sales and original products grew mostly in Europe in the first quarter, and profitability from the continent was $401 million, an increase of about 22%. In the international activity, revenues decreased by 10% to 524 million dollars and profitability shrank by 33% to 65 million dollars.

Francis said that “the results of the first quarter are driven by growth in our key innovation products, which continues to change the composition of Teva’s portfolio and support the improvement of the company’s financial profile. At the same time, the field of biosimilars becomes a significant factor for growth, alongside the launches of new generic products. This illustrates the centrality of the generics field as the basis of Teva’s business activity.”

Uri Hershkovitz, managing partner at the hedge fund Bennu Pharma, also commented on the reports and said that they look very good. “The generic is weak as expected because of the revlimid, but the Ostado is well above, and so is profitability,” says Hershkowitz. He urges investors “not to be alarmed by the reduction in the profit forecast, this is a $700 million accounting reduction for the announced purchase”, and indicates the board of directors’ intention to carry out a self-purchase of shares.

nature It is traded on the New York and Tel Aviv stock exchanges at a value of 36.8 billion dollars, after the share price jumped more than 2 times in the last year, but since the beginning of the year the yield is minor, about 1%. Against the background of the increase in the stock, Francis recently redeemed some of the shares he had in the framework of a blind sale of shares, for an aggregate amount of 16.7 million dollars.