When Shlomo Yanai, CEO of Teva Pharmaceutical Industries Ltd., opened a conference call on May 2 to discuss his company's acquisition of Cephalon Inc., he resorted to a well-worn sports cliché to describe the deal. But in calling the $6.8 billion purchase a "game changer," Yanai may have been offering up more than just an empty metaphor. By bottling up Cephalon, Teva took another step in blurring the lines between generic drug makers, traditional pharmaceutical companies and research-driven biotechs.

On one level, the transaction appears typical, sharing cost-cutting and pipeline-boosting rationales with big pharmaceutical firms that have pursued competitors large and small. Says Michael Hollingsworth II, the co-head of Nelson Mullins Riley & Scarborough LLP's M&A group, the Cephalon deal is a "textbook broadening of the portfolio."

But the deal underlines just how much Teva has evolved from being a straight generics company. After all, Teva has its own blockbuster drug, Copaxone, a drug developed by Israeli researchers used to treat multiple sclerosis. Copaxone accounted for nearly 21% of the company's $16.1 billion in net sales in 2010, and it's going off patent in 2014. Several companies, among them Momenta Pharmaceuticals Inc. and Mylan Inc., have been preparing generic versions of the drug.

Sam Zucker, a partner at O'Melveny & Myers LLP's Silicon Valley office, says, "The king of the generics just entered into a major acquisition in order to reduce the threat it faces from generics."

Cephalon has a portfolio of products serving therapeutic areas ranging from central nervous system disorders to oncology to pain management that brought in $2.8 billion in sales in 2010. Among its biggest sellers is Treanda, which treats patients with chronic lymphocytic leukemia and indolent B-cell non-Hodgkin's lymphoma; it churned out 14% of Cephalon's net sales in 2010. Provigil, a narcolepsy drug, accounted for 38% of Cephalon's sales. The company has been trying to replace Provigil with a tweaked version, Nuvigil, as Provigil faces a patent cliff in 2012. Teva itself is one of a handful of companies with a generic version of Provigil waiting in the wings.

In the conference call, Teva CFO Eyal Desheh called Cephalon's portfolio "one of the best assets money can buy in [the] industry today."

Piper Jaffray & Co. analyst David Amsellem also notes, in yet another sports metaphor, that Cephalon has several "shots on goal," among them Cinquil, an asthma drug that had success in Phase 2 trials; and a tamper-resistant formulation of hydrocodone that is in Phase 3 trials and could be filed with the Food and Drug Administration next year.

Hollingsworth adds that if even "two or three of [Cephalon's pipeline products] become blockbusters," Cephalon will already become a successful acquisition for Teva.

Teva faced its share of competition in tracking down Cephalon. The purchase includes a breakup fee of $275 million -- more than 4% -- "a reflection that it's a well-shopped company," says Scott Sonnenblick, a partner at Linklaters LLP who is not involved with the deal. Teva North America president and CEO William Marth said on the conference call that Teva and Cephalon had been in discussions for "quite some time." Those talks took on urgency when Mississauga, Ontario-based Valeant Pharmaceuticals International Inc. launched a $5.7 billion hostile bid for Cephalon at the end of March. Marth didn't respond to e-mail requests for comment.

A deal between Cephalon and Valeant was troubled from the start. Valeant was not interested in Cephalon's oncology products -- it even had a second offer on the table to purchase Cephalon's non-oncology products. Cephalon responded by promptly acquiring Malvern, Pa.-based oncology therapeutics company Gemin X Pharmaceuticals Inc. for $225 million on March 21 and buying up the outstanding shares of ChemGenex Pharmaceuticals Ltd. of Geelong, Australia, for A$167 million ($175 million) seven days later. "Valeant and Teva clearly valued Cephalon's pipeline differently," Zucker says.

Valeant's proposed price, which translated to $73 per share, was ultimately dismissed as too low by Cephalon (Valeant had indicated the offer could rise if it were allowed to perform due diligence). Cephalon CEO Kevin Buchi said on the call that once the company determined Valeant's deal was inadequate, it examined a "wide range of possible transactions" and found Teva's offer would best maximize its value. Teva paid a 12% premium to the Valeant bid and a 39% premium to the target's price the day after news broke of Valeant's overture.

Valeant has since withdrawn its bid and congratulated Teva and Cephalon on the deal, noting the "very full value" that was offered. Valeant wasn't completely heartbroken: It still holds more than 1 million Cephalon shares.

Teva isn't likely to be done with acquisitions. The company started out in 1901 as a small wholesale drug shop in Jerusalem, took on its current form through a three-way merger in 1980 and has been acquiring ever since. It has made several massive generics plays since 2000 alone, acquiring Novopharm Inc., Sicor Inc., Ivax Corp., Barr Pharmaceuticals Inc. and Ratiopharm GmbH. Its sales projections suggest further deals for branded drugs are on the horizon: After posting $4.6 billion in sales from its branded products in 2010, Teva says it aims to push that number to $9 billion by 2015. While Cephalon's stable of products and its drug pipeline will push that figure up -- Teva said May 2 that it now expects $7 billion in annual sales from its branded division -- the company will still have some ground to cover. But it won't be easy for Teva to juggle further acquisitions as it integrates Cephalon.

"It takes such a long time to digest such a big deal that the small deals get put on hold," O'Melveny's Zucker says. "And if Teva sticks to its effort to meet its aggressive revenue projections for 2015, it won't have the luxury of doing that."

For the industry itself, the deal portends fewer easy classifications of drug companies. Linklaters' Sonnenblick predicts "a big wave" of similar deals: "Branded companies are becoming generics, and generics are becoming branded," he says.

Adds Zucker, "We could reach a point in 10 years where people stop categorizing companies as generics versus specialty pharma and branded pharma and instead just look at the portfolio."