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Allergan Buys Naurex, Boosts Mental Health Portfolio

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Allergan plc (AGN - Free Report) announced that it has acquired Naurex Inc. – a clinical-stage privately held biotech company, focused on discovering and developing treatments for the central nervous system including depression.  

Allergan paid Naurex $560 million upfront of which $100 million is payable in Jan 2016. In addition, Allergan has agreed to make certain R&D success-based and sales-threshold milestone payments.   

How Will Allergan Benefit?

With this acquisition, Allergan has added two N-methyl-D-aspartate receptor modulators – rapastinel (GLYX-13) and NRX-1074 – to its portfolio. Both are being developed for the treatment of major depressive disorder (MDD).  

Rapastinel, a once-weekly, intravenous formulation, is Naurex’s lead pipeline candidate. The candidate is expected to move into phase III development next year. Meanwhile, NRX-1074, a next-generation candidate, is in phase II development for an IV form and in phase I for an oral formulation.

At the time of announcing the acquisition (Jul 2015), Allergan had said that it remains committed to de-levering to below 3.5x debt to adjusted EBITDA by the end of the first quarter of 2016.

Our Take

The deal is in line with Allergan’s strategy of boosting and strengthening its late-stage mental health pipeline with therapies in development for the treatment of schizophrenia, bipolar disorder and chronic migraine. Given that MDD is a serious medical condition that requires treatment and affects about 7% of the adult population in the U.S., we are positive on the deal.

Meanwhile, Allergan has been working on expanding its presence in the branded market and has been bolstering its portfolio through a flurry of back-to-back deals. These include the Durata Therapeutics deal completed in Nov 2014 (to boost its infectious disease portfolio), the Forest Labs acquisition (significantly boosted branded products portfolio) and the Mar 2015 Allergan Inc. acquisition among others. Recently concluded deals include the acquisition of clinical-stage medical device company, Oculeve, focused on the development of treatments for dry eye disease.  

Allergan is also looking to acquire KYTHERA Biopharmaceuticals, Inc. – an aesthetic products manufacturer. With this acquisition, Allergan will boost its facial aesthetics portfolio. The deal is expected to close in the current quarter.

Allergan is a Zacks Rank #3 (Hold) stock. Gilead Sciences Inc. (GILD - Free Report) and Dr. Reddy's Laboratories Ltd. (RDY - Free Report) are some better-ranked stocks in the health care sector, each carrying a Zacks Rank #1 (Strong Buy).

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