Deal-hungry Valeant has agreed to buy Salix Pharmaceuticals of the US for $10bn, adding to its portfolio of gastroenterology drugs.
The $158-per-share deal comes after Valeant was reported to be vying against rival Shire to arrange a takeover of Salix, with additional reports linking Endo Pharmaceuticals with the company.
In addition to the $10bn price tag Valeant will also absorb $4.5bn in debt – adding to its own liabilities of more than $15bn – although the Canadian company insisted the merger would provide $500m a year in cost-saving opportunities and also slash the tax paid on Salix revenues, currently riding at more than 35%.
The savings will come from corporate overheads and R&D spending, said the two companies in a joint statement.
Valeant has been on the lookout for a major acquisition since its $53bn bid for Allergan was rebuffed last year, with the latter eventually agreeing a merger with Actavis.
Adding Salix to the fold will bring in traveller’s diarrhoea and hepatic encephalopathy therapy Xifaxan (rifaximin), as well as other products such as diabetes therapy Glumetza (extended-release metformin) that collectively brought in $1.1bn in the first nine months of 2014, up more than 60% on the prior year.
The portfolio “is an ideal strategic fit for Valeant’s diversified portfolio of specialty products,” commented Valeant chief executive Michael Pearson.
Salix is due to report full-year results early next month, but predicted a few weeks ago that Xifaxan would reach $750m in sales, with Glumetza adding $255m. Both products have however been affected by over-supply issues that resulted in a cut in 2014 revenue and earnings forecasts.
Meanwhile, Salix was also thrown into the spotlight after Allergan pulled out of a proposed merger – arranged as a defense against Valeant’s bid – citing accounting irregularities. Shortly afterwards, chief financial officer Adam Derbyshire left the company, with chief executive Carolyn Logan resigning last month.
Valeant said it had examined the inventory situation prior to making its bid and was confident it could restore it to normal levels by the end of this year, although it revealed the net impact of the over-supply could be as much as $500m in 2015.
Xifaxan is also under regulatory review in the US as a treatment for irritable bowel syndrome, with the FDA due to deliver a verdict by the end of this month, and this could provide additional growth momentum for the product.
Valeant and Salix are also expecting to benefit from the launch of a new oral form of its injectable Relistor (methylnaltrexone bromide) product for cancer pain.