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The US Food and Drug Administration (FDA) recently granted orphan drug designation to Teva Pharmaceutical Industries Ltd (TEVA - Analyst Report) and Xenon Pharmaceuticals Inc. for their pain management candidate, XEN402. Orphan drug status was granted for the treatment of pain associated with erythromelalgia (EM).

XEN402 is in a phase II study for a variety of pain-related disorders. XEN402 is being studied in both topical and oral forms.

Oral XEN402 was shown to relieve pain related to EM, a rare neuropathic pain condition. A phase II trial on topical XEN402, which evaluated its effectiveness in reducing pain related to post herpetic neuralgia, showed statistically significant data.

In Dec 2012, Teva entered into an exclusive worldwide license agreement with Xenon for XEN402.

Financial terms of the deal include an upfront payment of $41 million to Xenon from Teva. Additionally, Teva will make development, regulatory and sales-based milestone payments up to $335 million. Xenon is eligible to receive royalties on sales and also has an option to commercialize the drug in the US.

Teva is working on streamlining its pipeline and expects to move 10 new therapeutic entities (NTEs) into development in 2013. Meanwhile, as far as generics are concerned, Teva intends to pursue first-to-file and first-to-market opportunities and seek approval for complex generics which are likely to face less competition.

Teva currently carries a Zacks Rank #4 (Sell). The company is going through a transition period. Headwinds include EU pricing pressure, potential new competition for branded products (especially Copaxone) and fewer generic product launches compared to 2012.

Currently, companies like Mylan (MYL - Analyst Report), Actavis, Inc. (ACT - Analyst Report) and Akorn, Inc. (AKRX - Snapshot Report) look more attractive with a Zacks Rank #2 (Buy).

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