With investors still awaiting the appointment of a new CEO following Jeremy Levin’s abrupt departure in October, Teva Pharmaceutical Industries Ltd. made an unsolicited $114 million cash offer for Nupathe Inc., starting a surprise bidding war with Endo Health Solutions, which inked a deal last month to acquire the small specialty pharma firm for $105 million in up-front cash.

Teva’s $3.65-per-share offer marked a 28 percent premium over Endo’s $2.85-per-share bid and a 13 percent premium to Nupathe’s Jan. 7 closing price. Shares of Nupathe (NASDAQ:PATH) jumped $1.15, or 35.6 percent, to close Wednesday at $4.38.

For analysts following Teva, the move appeared particularly surprising because the firm is taking a “capital commitment over a licensing approach,” noted Randall Stanicky, of RBC Capital Markets, though the initial cash outlay is “relatively modest.”

It also signals that Teva’s overall growth strategy is unlikely to change with the naming of a new CEO, Stanicky wrote in a research report.

That announcement is expected any day. According to Reuters, a source pointed to Teva board member Erez Vigodman as the leading candidate to fill the top spot. But whoever it is will be tasked with righting a ship that has been keeling a bit in the past few years.

“The key to Teva’s return to growth is the emergence of growth from the pipeline, which we think is limited over the next couple of years,” RBC’s Stanicky added.

Jerusalem-based Teva made its name as a generics drugmaker, but its most lucrative product has been an innovative one: Multiple sclerosis drug Copaxone (glatiramer acetate injection) brought in roughly a fifth of Teva’s overall sales in 2012 – about $4 billion. The drug has battled competition in the space from the likes of Rebif (beta interferon 1a, Merck Serono), Gilenya (fingolimod, Novartis AG), Betaseron (beta interferon 1b, Bayer AG), Aubagio (teriflunomide, Genzyme/Sanofi SA) and Biogen Idec Inc.’s Avonex (interferon beta-1a), Tysabri (natalizumab) and newly approved Tecfidera (dimethyl fumarate).

But last year Teva lost a critical court battle to extend the patent life for Copaxone, which means a generic competitor could hit the market as early as May of this year. In Teva’s favor, however, is the fact that Copaxone is a difficult-to-manufacture biologic, and generic contenders from Momenta Pharmaceuticals Inc. and Mylan Inc. have yet to clear the FDA. (See BioWorld Today, June 30, 2013.)

In anticipation of Copaxone’s patent expiration, the big pharma had sought to bolster and diversity its pipeline. In 2011, it added oncology and pain programs, including narcolepsy drug Nuvigil (armodafinil), in its $6.8 billion buyout of Cephalon Inc. – trumping a previous $5.7 billion bid from Valeant Pharmaceutical International Inc. It’s done additional deals in the last few years in the areas of oncology and respiratory disease in deals with Oncogenex Pharmaceuticals Inc. and Microdose Therapeutx Inc., respectively. (See BioWorld Today, May 3, 2011.)

As with other big pharmas, however, Teva has not been without its share of setbacks. It scrapped plans to expand Nuvigil’s use in the broad antipsychotic market in September after the drug missed endpoints in a Phase III study as an adjunct therapy in patients with major depression associated with bipolar disorder. Slow progress in biosimilars approval standards put the kibosh on a joint venture with Swiss firm Lonza Group. And, in oncology, Teva pulled out of an antibody collaboration with Curetech Ltd. in February and declined an option to cancer drug RX-3117 from Rexahn Pharmaceuticals Inc. in August. (See BioWorld Today, Aug. 29, 2013.)

In October, just before Levin stepped down – reportedly after clashing with the board – the firm said it would cut 5,000 jobs, or 10 percent of its work force, to reduce costs by $2 billion in 2017 and redirect resources to growing its generics business and select R&D programs.

NUPATHE BID 'NOT INCONSISTENT’

While its offer for Nupathe caught many industry observers by surprise, the Conshohocken, Pa.-based small specialty pharma could be a good fit for Teva. As RBC’s Stanicky noted, Zecuity “itself is not inconsistent with Teva’s brand focus.”

He pointed to similar business development activity such as the May 2013 deal giving Teva U.S. commercialization rights to recently approved Adasuve, a version of antipsychotic drug loxapine delivered via the Staccato technology developed by Alexza Pharmaceuticals Inc. Teva paid $40 million up front and promised up to $195 million in milestones, plus tiered royalties. (See BioWorld Today, May 9, 2013.)

Teva’s shares (NYSE:TEVA) closed Wednesday at $41.05, down 16 cents.

In an SEC filing, Nupathe said it will review Teva’s proposal but, in the meantime, its board continues to unanimously recommend Endo’s offer to shareholders.

In addition to the up-front cash, both Endo and Teva are offering up to $3.15 per share linked to sales of migraine treatment Zecuity (sumatriptan iontophoretic transdermal system), though Endo’s milestones are more favorable for Nupathe, with $2.15 tied to Zecuity sales topping $100 million during any four-quarter period prior to the ninth anniversary of the first sale, and the remaining $1 per share if sales exceed $300 million during any four-quarter period during that same time frame.

Teva said it would give Nupathe shareholders 85 cents per share for sales reaching at least $100 million during any four consecutive quarters, $1 per share for sales reaching at least $300 million for four consecutive quarters and $1.30 per share tied to sales reaching at least $450 million during any four consecutive quarters.

The first patch designed to deliver sumatriptan, Zecuity has had analysts predicting peak annual sales exceeding $1.5 billion. But the product, which gained approval a year ago, has yet to test its mettle commercially because Nupathe, with its limited resources, delayed market launch while it sought a partnership. (See BioWorld Today, Jan. 22, 2013.)

The single-use, battery-powered patch was approved based on Phase III studies demonstrating relief of headache pain, migraine-related nausea and sensitivity to light and sound, with a low rate of triptan sensations such as chest tightening and flushing. (See BioWorld Today, Jan. 22, 2013.)

MORE SPECIALTY PHARMA M&A?

Regardless of whether Nupathe stays with Endo or opts for Teva’s offer, the recent bids point to the continuing trend of acquisition activity among specialty pharma and generics firms, which made up some of the biggest deals in 2013.

Those include the $8.6 billion buyout of Elan Corp. plc by generics firm Perrigo Co. in July. That deal comprised about $3.26 billion in cash up front, plus shares of Perrigo. (See BioWorld Today, July 30, 2013.)

In November, specialty pharma Shire plc offered $4.2 billion for Viropharma Inc. And the year kicked off with another migraine deal, as Allergan Inc. paid $25 per share for Map Pharmaceuticals Inc. That deal, totaling $958 million, brought Levadex, an orally inhaled formulation of intravenous migraine drug dihydroergotamine, which received a complete response letter in April. (See BioWorld Today, Jan. 24, 2013, and Nov. 12, 2013.)

M&A in specialty pharma is likely to “continue to accelerate in 2014,” predicted RBC’s Stanicky. “We expect a lot more deal activity across the space, which [will] be a tailwind to performance this year for both buyers and sellers.”