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Endo's $2.2bn bid for Auxilium Pharma could thwart QLT deal

Auxilium in the $345m process of acquiring Canadian biotech company

Endo PharmaEndo International has made a $2.2bn bid to acquire urology specialist Auxilium Pharmaceuticals and expand its presence in the men's health category.

The unsolicited bid comes as US-based Auxilium is in the throes of its own $345m acquisition of Canadian company QLT - which has been billed as a tax inversion transaction - as well as a corporate restructuring aimed at cutting annual expenses by around $75m.

Ireland-incorporated Endo is offering $28.10 per Auxilium share in the cash and stock transaction, which represents a premium of 31% on the company's closing price yesterday, and Endo has said it is not interested in factoring QLT into the equation.

Rajiv De Silva, chief executive of Endo, said the acquisition "would provide Auxilium shareholders [with] immediate cash value  ... as well as the opportunity to participate in the upside potential of a leading global specialty healthcare company."

Auxilium has 12 approved products in its portfolio, including a range of testosterone supplements headed by Testim Gel, as well as Xiaflex (collagenase clostridium histolyticum) for Dupuytren's contracture - a condition that causes fingers to bend into the palm of the hand.

The company crossed the $100m revenue threshold for the first time in the second quarter of 2014, with Testim accounting for around $55m of that total but starting to decline, while Xiaflex adding around $19m to the pot. The remainder of its portfolio consists of an implantable testosterone supplement called Testopel and specialty products for orthopaedics and respiratory diseases.

While Auxilium's entire product range is a complementary fit for Endo's business, the company is particularly interested in the growth prospects for Xiaflex and said it expects to "accelerate development of the product in potential new indications."

Xiaflex has been cleared in the US and Europe for Dupuytren's and last year the FDA cleared a second indication for the drug - Peyronie's disease - a condition in which scar tissue develops along the shaft of the penis.

Auxilium also has clinical trials of the product ongoing in frozen shoulder and a potential cosmetic indication - the treatment of cellulite - that could provide a big upside to the drug's sales potential.

De Silva said the deal "is well aligned with Endo's strategy to pursue accretive, value creating organic growth opportunities."

The Irish company - itself the product of a corporate tax-saving inversion deal which closed earlier this year with the $1.6bn purchase of Paladin Labs - is on an acquisitive streak at the moment.

In the last few months it has also bought NuPathe for $105m - getting hold of migraine patch Zecuity (sumatriptan) - and in June offered $600m for generic player DAVA Pharmaceuticals.

Article by
Phil Taylor

17th September 2014

From: Sales

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