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Forest Labs’ $1.46 billion acquisition of Furiex strengthens GI business

Tuesday, April 29, 2014

The pharmaceutical industry’s shopping spree for specific disease expertise or scale continued this week as Forest Laboratories announced plans to acquire Furiex Pharmaceuticals for up to $1.46 billion, including milestone payments.

The deal comes as Forest Labs itself is the target of a $25 billion takeover by Actavis—which consented to the transaction and did not expect the Furiex acquisition to alter the timing of its plans. Furiex is a drug development collaboration company with several royalty-bearing products.   

Forest will pay $1.1 billion, or $95 per share, for Furiex, based in Morrisville, N.C. It also will pay up to $360 million, depending on the development of eluxadoline, Furiex’s drug to treat the symptoms of diarrhea-predominant irritable bowel syndrome. The medication, which has received FDA Fast Track Designation, recently completed two late stage clinical trials and is expected to be submitted for regulatory approval by the end of the third quarter.

“Forest’s acquisition of our company is a testament to the strength of the business we have built,” said Fred Eshelman, founding chairman of Furiex and co-founder of PPD. “There is a strong business fit between Furiex and Forest, and eluxadoline is expected to contribute to Forest’s GI franchise.”

Forest Labs currently has its own, FDA-approved, drug Linzess to treat irritable bowel syndrome with constipation. Together with eluxadoline, Forest will own treatments for the two most common subtypes of IBS, which fit well with its $2.9 billion acquisition of Aptalis, which focuses on gastrointestinal disorders and cystic fibrosis, earlier this year.

“(Eluxadoline) really is the flip side of the same coin of Linzess, so we are the perfect owner of this asset,” said Brent Saunders, Forest CEO, in a conference call, adding the Furiex deal is an extension of Forest’s GI business.

“With eluxadoline, we expect to have one of the broadest offerings for the $38 billion GI disease market,” Saunders said in a statement.

Forest also announced it plans to divest royalties that Furiex receives on two treatments to Royalty Pharma for about $415 million, upon completion of the Furiex acquisition. That transaction will lower the final price of the Furiex purchase by about $315 million after taxes to $1.1 billion.

“In partnering on this transaction, we believe Forest and Royalty Pharma have created a win-win situation,” said Pablo Legorreta, CEO of Royalty Pharma, which acquires royalty interests on marketed and late stage biopharmaceutical products. “Forest will acquire a company with a very exciting GI product candidate, while Royalty Pharma will acquire the non-core passive royalty assets. Our goal is to become the M&A partner of choice for pharma and biotech  companies, allowing them to focus their resources on strategic assets.”

Forest expects to use cash on hand to fund the purchase of Furiex, the company said in a statement.  The planned acquisition is expected to close in the second or third quarter of 2014, pending regulatory review and Furiex shareholder approval.

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