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Jun 24, 2014

Endo Builds Generics Pipeline with Up to $600M DAVA Deal

  • Endo International said today it will acquire DAVA Pharmaceuticals, in an up-to-$600 million deal that expands the buyer’s generics portfolio with marketed, prelaunch, and pipeline compounds.

    The acquisition gives Endo DAVA's generics portfolio, headed by 13 products marketed in numerous therapeutic areas—including the recently launched generic versions of the antibacterial drugs Doxycycline and Cefdinir.

    More than five new products are expected to be launched in 2015, and more than 20 over the next several years, Endo said.

    Endo agreed to shell out $575 million cash upfront for DAVA, as well as up to $25 million in additional cash tied to sales milestones. The deal is subject to regulatory approvals and customary closing conditions, and is expected to be completed in the second half of 2014.

    “The acquisition of DAVA is another step in our pursuit of accretive and strategic external growth opportunities where we see a clear path to meaningful upside and synergies," Rajiv De Silva, Endo’s president and CEO, said in a statement that did not detail that near-term cost-cutting potential.

    Endo said the DAVA acquisition would be immediately accretive to the buyer’s 2014 adjusted earnings per share (EPS). On May 1, Endo raised its expected 2014 adjusted diluted EPS to a range from $3.60 to $3.85.

    DAVA finished last year with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $99 million, on revenue of about $131 million. The acquired company added to its reported EBITDA of $64 million with one-time adjustments related to price increases, executive compensation, and nonrecurring consulting expenses.

    "DAVA is well-positioned for continued strong and highly predictable financial performance with its existing commercial portfolio and attractive near-term pipeline, and is a natural fit for our generics business.”

    Additionally, the DAVA deal continues a year-long buying spree for Endo.

    Since a June 2013 restructuring that saw it cut 15% of its workforce or about 700 jobs, Endo expanded its global presence in Canada and emerging markets through its approximately $2.7 billion cash-and-stock acquisition of Canadian-based Paladin Labs, completed in January. A month later, Endo’s Qualitest generic-drugs subsidiary completed its purchase of specialty generics company Boca Pharmacal for about $225 million cash.

    In April, Endo agreed to buy Mexico City-based Grupo Farmaceutico Somar for an undisclosed sum, expanding its presence in Latin America while gaining more than 60 products expected to launch over the next three years. That deal is set to close in the third quarter.

    Also that month, Endo snapped up global rights to the migraine and headache drug Sumavel® DosePro® (sumatriptan injection) for subcutaneous use—including its needle-free delivery system—from Zogenix for $85 million plus milestones and royalties.

    And earlier this month, Endo completed the sale of its branded pharmaceutical early-stage drug discovery platform to AsanaBioSciences, an independent member of the Amneal Alliance of Companies, for undisclosed upfront and milestone payments. The sale included early-stage drug discovery and development candidates in areas that included oncology, pain, and inflammation.

    One attempted acquisition fell through, however. In January, NuPathe chose a higher $144 million-plus-milestones offer from Teva Pharmaceutical Industries over an earlier offer from Endo—which walked away with a $5 million termination fee from NuPathe as a result.

    Endo also shed some assets, as its HealthTronics subsidiary sold its anatomical pathology business HealthTronics Laboratory Solutions to Metamark Genetics for an undisclosed price.


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