A lot to digest

Axcan gobbles up Eurand for almost $600 million

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AMSTERDAM, The Netherlands—Eurand NV, a global specialty pharmaceutical company, and Axcan Holdings Inc., a pharmaceutical company focused on the treatment of gastrointestinal disorders, announced Dec. 1 an agreement under which Axcan will ingest all the outstanding shares of Eurand.

The independent directors of Eurand, composed entirely of non-management, non-majority-shareholder directors and acting on behalf of Eurand's board, have unanimously approved the acquisition agreement and recommended to Eurand shareholders that they tender their shares into the offer.

The companies estimate that the fully diluted equity value of the transaction is $583 million. Under the terms of the agreement, it is anticipated that a wholly owned subsidiary of Axcan will present a tender offer for all of the outstanding shares of Eurand. The transaction is expected to close in the second quarter.

Gastroenterology, Axcan's specialty, is defined as the diagnosis and treatment of diseases affecting the entire digestive system including the esophagus, the stomach, the small and large intestines, the liver, the pancreas and the gall bladder. Irritable bowel syndrome and dyspepsia are some of the most common functional GI disorders. Such disorders are diagnosed based on symptoms, and lifelong treatments are often required to alleviate these symptoms. The symptoms due to such disorders can cause discomfort, ranging from inconvenience to debilitation.

Much remains unknown about gastrointestinal diseases and disorders. Consequently, there is an ongoing need for research, and Axcan has operated in that space for the past 25 years.

Eurand is a specialty pharmaceutical company that develops, manufactures and commercializes enhanced pharmaceutical and biopharmaceutical products using proprietary drug formulation technologies. A publicly traded company, Eurand has operating units in the United States and Europe.

Eurand's business strategy is focused in sales and marketing of specialty healthcare products in the United States, including the research, development and commercialization of products for use in the treatment of cystic fibrosis and gastrointestinal-related diseases. The company also works on the development and licensing of products and technologies with other companies for out-licensing worldwide.

Eurand has had six products approved by the U.S. Food and Drug Administration since 2001 and has a pipeline of product candidates in development for itself and its collaboration partners. Its technology platforms include bioavailability enhancement of poorly soluble drugs, custom release profiles and taste-masking/orally disintegrating tablet formulations.

Neither company was willing to offer comment on the transactions as 2010 drew to a close.

Gearóid Faherty, outgoing chairman and CEO of Eurand, said in a statement that the last several years have been transformational for his company.

"The last several years have seen Eurand evolve from being a license and development, drug formulation company into a fully integrated, specialty pharmaceutical business with the development and launch of ZENPEP," Faherty stated. "I am very proud of the achievements of the Eurand team and this transaction shows the attractiveness of the business that we have created."

Faherty will surrender the reins of Eurand at the dawn of 2011. At that time, John J. Fraher, currently chief commercial officer of Eurand, will become CEO.

The combined company will have an enhanced presence in the specialty pharmaceuticals sector and will be led by Dr. Frank Verwiel, president and CEO of Axcan.

Verwiel stated that he looks forward to both the new challenges and opportunities.

"Through combining the organizations, we look to create a new organization with an enhanced product portfolio, broader geographic reach, a robust research and development pipeline, innovative pharmaceutical development and manufacturing platforms, and a world-class sales force," Verwiel said in a prepared statement.

The transaction is subject the condition that a minimum of 80 percent of Eurand shares be tendered, as well as receipt of antitrust approval. Affiliates of Warburg Pincus, which own approximately 55 percent of Eurand's outstanding shares in the aggregate, and Faherty, who owns approximately 3.7 percent of Eurand's outstanding shares in the aggregate, have entered into agreements to tender their shares into the offer. Remaining shareholders were given time at the end of 2010 to tender their shares for $12 each in cash, less taxes.

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