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Teva Pharmaceutical Industries Ltd. (TEVA - Analyst Report) announced that it will acquire development-stage biotech company, Labrys Biologics, Inc. for an upfront payment of $200 million.

With this acquisition, Teva is looking to strengthen its position in the global pain market. Teva aims to achieve a leading position in the global pain market by 2020.

Terms of the Deal

In addition to the upfront cash payment of $200 million Teva could end up paying up to $625 million once certain pre-launch milestones are achieved.

With this acquisition, Teva will acquire LBR-101 which is in phase II studies for the prevention of chronic and episodic migraine. The company estimates that potential peak sales of LBR-101 could be $2 billion − $3 billion.

Our Take

Teva has been on an acquisition spree of late. The company acquired NuPathe Inc. in Feb 2014, which added to its portfolio the only FDA-approved migraine patch, Zecuity, for the treatment of acute migraine (with or without aura) in adults. The LBR-101 development program coupled with Zecuity will boost Teva’s pain portfolio.

Considering the potential genericization of Teva’s multiple sclerosis drug, Copaxone, the company has been working on strengthening its pipeline and product portfolio. The earlier-than-expected entry of generic competition for Copaxone would cut 2014 revenues and earnings significantly.

Teva carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Mallinckrodt plc (MNK - Snapshot Report), Akorn Inc. (AKRX - Snapshot Report) and KaloBios Pharmaceuticals, Inc. (KBIO - Snapshot Report). While Mallinckrodt carries a Zacks Rank #1 (Strong Buy), Akorn and KaloBios hold Zacks Rank #2 (Buy).

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