RBC Capital Markets hosted an investor meeting with Cephalon Inc.'s (NASDAQ: CEPH) chief financial officer Wilco Groenhuysen and chief marketing officer Lesley Russell. The brokerage listed out key takeaways regarding the proposed acquisition of Cephalon by Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA).
Cephalon's management does not expect antitrust concerns given the minimal overlap between the Teva and Cephalon businesses. Regarding the media report that the Federal Trade Commission (FTC) / European Union may have issues related to the Provigil patent settlements, thus delaying the deal, management believes there is no basis for such reports, said Shibani Malhotra, an analyst at RBC Capital Markets.
Cephalon said that during discussions Teva had been very interested in its late stage pipeline and could continue to invest in a fair proportion of this. Across its pipeline, Cephalon sees tamper-resistant hydrocodone (chronic pain), Cinquil (eosinophillic asthma), and Revascor (congestive heart failure) as the most exciting opportunities, Malhotra said in note to clients.
Regarding a second-generation Treanda, Cephalon noted that it had discontinued its efforts in this regard due to formulation issues. It is still possible that Teva may choose to pursue alternative strategies to develop this product, Malhotra added.
Cephalon's management noted that its in-house legal department is even more confident on the Nuvigil polymorph patent than it was on the Provigil patents. While the 30-month stay on Nuvigil ends in April 2012, the trial date relating to the P-IV challenge is set for July 2012. As such, Cephalon has requested that the stay be extended until the trial starts and expects this request to be granted, said Malhotra.
While Cephalon management would not formally comment on the composition or magnitude of synergies that Teva could extract from Cephalon, it did state that around 60 percent of its selling, general and administrative expenses is attributable to the U.S. (40 percent of this general and administrative expense and 60 percent selling and marketing expense).
As a reminder, Teva has guided to $500 million in synergies by 2014. Malhotra said he understands that these does not assume any major cuts in research and development spend.
Teva stock is trading up 0.41 percent at $49.98 on the NASDAQ Stock Market at 10:10 am EDT, while Cephalon is trading up 0.03 percent at $79.69.