| 4 min read
Register for free to listen to this article
Listen with Speechify
0:00
4:00
DUBLIN, Ireland—Seeking in part to gain a broader offering of urology and orthopedic products that are natural complements to its current men’s health and pain products, Irish company Endo International plc announced in early October a definitive agreement with Auxilium Pharmaceuticals Inc. to acquire the Chesterbrook, Pa.-based company for $2.6 billion.
 
Under the terms of the deal, Endo will acquire all of the outstanding shares of common stock of Auxilium for a per-share consideration of $33.25 in a cash-and-stock transaction. The boards of directors of both companies have unanimously approved the transaction, including the repayment and assumption of debt. The transaction will include an election mechanism for Auxilium stockholders to elect cash and stock, all-stock or all-cash consideration, subject to proration in accordance with the terms of the definitive agreement. The per-share consideration represents a premium of 55 percent to Auxilium’s closing price on Sept. 16, 2014, the day Endo made public its proposal for Auxilium.
 
Immediately prior to the entering into the merger agreement with Endo, Auxilium terminated its proposed merger agreement with QLT Inc., in accordance with the terms of the QLT merger agreement.
 
According to Endo, the addition of Auxilium’s leading men’s health products and development portfolio should “significantly enhance Endo’s branded pharmaceutical business.”
 
“We are pleased to have reached this agreement with Auxilium, which we believe will create value for both Endo and Auxilium shareholders, as well as for patients, customers and employees,” said Rajiv De Silva, president and CEO of Endo. “By adding Auxilium’s complementary commercial portfolio, we believe this transaction is aligned with our strategy of pursuing accretive, value-creating growth opportunities. We intend to leverage Auxilium’s leading presence in men’s health, as well as our R&D capabilities and financial resources, to accelerate the growth of Xiaflex and Auxilium’s other products. We look forward to working with the Auxilium team to achieve the growth and synergy potential of this compelling strategic combination.”
 
Xiaflex seems to be a big selling point in the acquisition. It is a collagenase clostridium histolyticum (CCH) biologic compound currently approved in the United States, European Union, Canada and Australia for the treatment of adult Dupuytren’s contracture patients with a palpable cord and in the United States for the treatment of adult men with Peyronie’s disease with a palpable plaque and penile curvature deformity. Xiaflex is currently in a Phase 2a study for the treatment of edematous fibrosclerotic panniculopathy, commonly known as cellulite.
 
Leerink Partners, an investment bank specializing in healthcare, forecasts pre- and post-deal five-year revenue compound annual growth rates of 3 percent and 8 percent, respectively. “Key to the improved growth outlook is Auxilium’s ability to launch Xiaflex in Peyronie’s disease, where diagnosis rates remain low but Xiaflex offers a first-line alternative to surgery,” writes Jason Gerberry of Leerink. “Based on a recent MEDACorp survey of urologic surgeons, specialists see Xiaflex as a first-line treatment and plan to prescribe the drug to one-third of their patients within 12 months post-launch.”
 
Global research and consulting firm GlobalData values Auxilium’s pharmaceutical assets at approximately $2.5 billion, which it says is in line with Endo’s outlay. Largely driving the company’s valuation is Xiaflex with a net present value of $920 million, followed by Testopel at $570 million and Stendra at $558 million, says Adam Dion, GlobalData’s analyst covering healthcare industry dynamics.
 
He notes that Endo intends to leverage its resources to optimize and drive increased adoption of three key Auxilium drugs, which are Xiaflex, Testopel and Testim, the latter two both being hormone replacement agents.
 
“Testopel and Testim generated combined sales of $271 million in 2013, and will supplement Endo’s hypogonadism therapy Fortesta,” Dion explains.
 
However, GlobalData believes Endo’s purchase price might be slightly on the high side, “given that Auxilium was negotiating from a position of weakness.”
 
“Auxilium’s top-line revenue was flat in 2013, and the company has been faced with slowing sales of Testim and witnessed a 50-percent year-on-year drop in sales from Xiaflex,” Dion notes. “The company responded by announcing that it would cut about 190 jobs, or 30 percent of its workforce, as part of a plan to save $75 million per year. Auxilium was also considering purchasing the Canadian eye drugmaker QLT in an effort to shave costs to a lower tax domicile, but recent changes to tax laws most likely thwarted those efforts.”
 
Dion says that Endo’s motivation behind the deal centers on cash generation and cost-cutting, with the company expected to achieve annual cost synergies of about $175 million. “This synergy run-rate is expected to be immediately accretive in the first year after closing, and includes Auxilium’s reduction in annual operating expenses previously announced in September,” he explains. “After the transaction, Endo will have a stronger balance sheet, increased cash flow with improved financial flexibility to continue with its diversification strategy, transforming itself into a larger specialty pharma and medical device maker.”
 
Zacks Investment Research remarked in an analyst note, “We believe it is a wise decision for Endo to acquire Auxilium Pharma. Endo has been struggling financially due to generic competition affecting its key painkillers Lidoderm and Opana ER. The Auxilium Pharma acquisition will not only help Endo to offset the impact of genericization with new products but will also help to diversify its portfolio.”
 
For his part, Adrian Adams, CEO and president of Auxilium, noted in the news release about the acquisition deal that “We are proud of the work Auxilium has done to develop a portfolio of important products that are improving the lives of patients to create significant stockholder value. We believe this transaction is the culmination of those efforts. On behalf of the Auxilium board and management team, I want to thank our dedicated employees, engaged partners and strategic advisors for their continued hard work and commitment, which have been instrumental in building Auxilium into the diversified specialty biopharmaceutical company it is today.”

About the Author

Related Topics

Published In

Loading Next Article...
Loading Next Article...
Subscribe to Newsletter

Subscribe to our eNewsletters

Stay connected with all of the latest from Drug Discovery News.

Subscribe

Sponsored

An illustration of three immune cells attacking a cancer cell, representing the mechanism of chimeric antigen receptor-based cell therapy

Cell therapy's next frontiers

As cell therapy evolves rapidly, what advancements are on the horizon? 
An illustration of a human heart on top of a DNA strand

Reversing rejection: gene therapy in modern transplantation

Emerging gene editing approaches pave the way for safer, more successful transplants.
An 3D illustration of protein molecules in different colors

Identifying druggable therapeutic targets

Effective target identification is central to drug discovery, but finding the right drug target is not as simple as it may seem in theory. 
Drug Discovery News November 2024 Issue
Latest IssueVolume 20 • Issue 6 • November 2024

November 2024

November 2024 Issue

Explore this issue