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Nov 8, 2013

Salix Expands in GI Drugs and Beyond with $2.6B Santarus Acquisition

  • Salix Pharmaceuticals said it will acquire Santarus for about $2.6 billion, in an all-cash deal that expands the buyer’s gastrointestinal (GI) drug portfolio and extends its product offerings into primary care and diabetes.

    Salix said the combined company is expected to be a leader in treating gastrointestinal diseases with 22 marketed products—the best-selling of which is Xifaxan (rifaximin), which accounts for almost three-fourths of total sales for today’s Salix. No product of the combined company will account for more than 50% of sales.

    Xifaxan is sold in a 200 mg dose for travelers’ diarrhea caused by noninvasive strains of E. coli in patients 12 years of age and older, and a 550 mg dose for reducing the risk of overt hepatic encephalopathy recurrence in patients 18 years of age and older.

    The combined company, Salix said, will create a third sales force focused on gastroenterology and hepatology, with the goal of increasing promotional exposure for key GI products.

    Salix reasons its increased presence in the GI market will benefit the recently launched, Santarus-developed Uceris® (budesonide) extended release tablets, indicated for inducing remission in patients with active, mild to moderate ulcerative colitis.

    Uceris is one of five drugs marketed by Santarus; the other four are Zegerid® (omeprazole/sodium bicarbonate) for certain upper GI disorders; Glumetza® (metformin hydrochloride extended release tablets) and Cycloset® (bromocriptine mesylate) tablets, both for adults with type 2 diabetes as adjuncts to diet and exercise; and Fenoglide® (fenofibrate) tablets, indicated as an adjunct to diet to reduce high cholesterol in patients with type 2 diabetes.

    Santarus’ pipeline includes Ruconest® (recombinant human C1 esterase inhibitor) for acute angioedema attacks in patients with hereditary angioedema; the company is awaiting an FDA response by April 2014 to its BLA. Also in clinical development are rifamycin SV MMX®, now in Phase III testing for travelers’ diarrhea, and SAN-300, a monoclonal antibody for which the company completed a Phase I study.

    The boards of Salix and Santarus have approved the deal, which is expected to close in the first quarter of 2014. Salix said it will finance the acquisition using about $800 million cash on hand, and $1.95 billion in financing from Jefferies Finance, which also committed to provide an additional $150 million revolving credit facility.

    The combined company would have revenues of $1.348 billion and adjusted earnings before interest, taxes, depreciation, and amortization (EBIDTA) of $537 million.

    During the third quarter, Salix said yesterday, its total product revenue zoomed 29% year-over-year, to $238.2 million, while first-nine-month product revenues jumped 26%, to $676.2 million. Xifaxan generated the most in sales of any company product, with net product revenues of $165.9 million for the third quarter and $469.8 million for the first nine months of 2013.

    Next-highest in sales was Apriso (mesalamine), a once-daily treatment for maintenance of remission of ulcerative colitis. Apriso racked up $38.1 million in third-quarter sales, nearly double the $19.7 million of Q3 2012; and $91.5 million in January-September sales, up 62% from the year-ago period.

    “Through this acquisition, we will expand our ability to reach more patients and provide the additional products they need,” Carolyn Logan, Salix’s CEO, stated in a message posted on her company’s website. “We are excited to create a new company with greater scope and impact than either company could offer independently.”

    At $32 per share, the price is a roughly 36% premium above its November 6 closing price of $23.53 per share, and a 39% premium over Santarus’ average closing stock price for the prior 30-trading day period. 



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