Endo offers $370 million for Indevus

Endo Pharmaceuticals announced earlier this month that it entered into a merger agreement with Indevus Pharmaceuticals for $4.50 per share or $370 million in cash.

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CHADDS FORD, Pa.—Endo Pharmaceuticals announced earlier this month that it entered into a merger agreement with Indevus Pharmaceuticals for $4.50 per share or $370 million in cash. In addition, Indevus shareholders could receive an additional $3.00 per share, or $267 million based on achievement of specific sales and regulatory milestones, bringing the potential total value of the deal to $637 million.

At the helm of Endo since April, David Holvek, president and CEO, calls the proposed merger with Indevus a foundational deal that will allow the company to add on other complementary companies in the future should the need arise.

"The best long-term strategy for Endo was to find multiple new paths to growth by pursuing other medical specialties where we can support physicians better, offer more products to patients and add value to every healthcare dollar spent," Holvek says.

Of particular interest to Endo, which until now has been focused on branded and generic prescription drugs for pain management, is Indevus' 100-strong specialty sales force that regularly calls on urologists and endocrinologists.

Nancy Wysenski, Endo COO, says that the combination of the Indevus and Endo sales forces should make a powerful combination. This is especially true as the companies eye the potential approval of Nebido, Indevus' injectable testosterone replacement drug that for the treatment of hypogonadism. If all goes according to plan Nebido should hit the market sometime in 2010.

"Where the real potential lies is in Endo's ability to provide additional support to the Indevus products through our generalist field sales force," says Wysenski. "Once we get Nebido up and rolling and the approval comes through we expect that we would consider providing additional support. To make that a highly successful product [it] will require not only calls on the endocrinologist, but calls on the primary care practitioner as well."

At its heart, the proposed merger is counting on Endo being able to leverage its sales force and market position to successfully sell a broader array of separate, but related products. Not surprisingly, Indevus CEO Dr. Glen Cooper says he is sold on the notion.

"We share [Holvek's] vision of integrated products from different but related therapeutic areas. I believe this is the right approach to build business in specialty areas of large growth potential such as urology and endocrinology and I believe it is the right approach to building our business."

But not all financial analysts are sold on the deal. In a note to investors, Cowen and Co. analyst Ian Sanderson points out that "While the acquisition of Indevus is a positive diversification move for Endo, we believe investors will conclude that the execution is flawed on at least three counts." These factors include what Sanderson feels are modest sales potential for Indevus products, low market visibility and what he sees as an uncertain regulatory environment for Nebido.

Robert W. Baird analyst Lawrence H. Neibor was not quite so bearish, reaffirming his company's "neutral" rating on Endo stock, while viewing the acquisition as a method for Endo to diversify its product portfolio. DDN

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