California-based Avanir Pharmaceuticals Inc. is to be acquired by Otsuka Pharmaceutical Co., Ltd. for $3.5 billion.

The Japanese company said on Tuesday that this acquisition would strengthen its business in the area of neurological conditions.

Avanir specializes in treating diseases of the central nervous system (CNS). It developed and launched Nuedexta (dextromethorphan hydrobromide/quinidine sulfate) 20mg/10mg capsules in the United States in February 2011 as the world's first and only approved treatment for the neurological disease pseudobulbar affect (PBA).

This condition is characterized by sudden outbursts of involuntary crying and/or laughing in people living with certain neurological conditions or brain injuries.

Sales of Nuedexta in the 12 months to June 2014 amounted to $94 million, a 50 percent increase over the prior year.

The deal will also give the Japanese firm access to Avanir's pipeline of treatments for Alzheimer's disease, Parkinson's disease, migraine and other CNS indications. Its candidate AVP-786, intended to treat agitation associated with Alzheimer's disease, is being prepared for Phase III clinical trials.

According to Bloomberg, Otsuka has been looking for new sources of growth before 2015, when its patent on schizophrenia treatment Abilify (aripiprazole) is set to expire.

Under the terms of the acquisition agreement Otsuka will pay $17 per share, which is 13 percent higher than Avanir's closing price of $15 on Monday.