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Jan 8, 2014

Forest Labs Acquiring Aptalis for $2.9B

  • Forest Laboratories will acquire Aptalis from its private-equity owner TPG Capital for $2.9 billion cash, in the first major deal announced this year—a transaction designed to boost the acquiring company’s pipeline with gastrointestinal (GI) and cystic fibrosis compounds among other specialty drugs.

    The deal, subject to review by anti-trust authorities in the United States and Canada and customary closing conditions, is expected to close in the first half this year.

    “Aptalis is an excellent strategic and financial fit for Forest because of its strong product offerings in two therapeutic franchises that are complementary to Forest—GI in the United States and Canada and cystic fibrosis in Europe,” Brent Saunders, Forest Labs CEO and president, said in a statement. “The acquisition of Aptalis helps diversify Forest while advancing our strategy to create blockbuster therapeutic areas.”

    The deal is Saunders’ first since becoming CEO in October. Saunders and Forest, which reported sales of more than $3 billion in its last fiscal year, ending March 31, 2013, are scrambling to fill the revenue hole left by the loss of patent protection March 14, 2012, for Lexapro® (escitalopram oxalate). The antidepressant drug saw its sales collapse nearly 91% during FY2013, to $194.9 million from more than $2.1 billion the previous fiscal year.

    Headquartered in Bridgewater, NJ, Aptalis generated sales of $688 million in the fiscal year that ended September 30, 2013. More than 60% of company sales came from its top three products in the United States—the active ulcerative proctitis drug Canasa (mesalamine), the anti-ulcer medication Carafate (sucralfate), and Zenpep (pancrelipase), indicated for exocrine pancreatic insufficiency due to cystic fibrosis or other conditions. International sales accounted for approximately 15% of revenues, with the remaining 15% coming from the company’s third-party delivery technology provider and drug manufacturer, Aptalis Pharmaceutical Technologies.

    “There is a strong business fit between Aptalis and Forest, our strategies are closely aligned, and I am confident that Forest will maximize the opportunity for our products and patients,” added Frank Verwiel M.D., Aptalis’ CEO.

    Saunders said the acquisition of Aptalis is expected to add nearly $700 million in revenue in the company’s 2015 fiscal year, as well as generate $125 million in cost savings by the 2016 fiscal year for the combined company.

    TPG acquired Aptalis, formerly known as Axcan Pharma, in 2008 for $1.3 billion.

    Forest said it expects to use a combination of cash on hand and debt to fund the deal, and has already secured a commitment for a $1.9 billion bridge facility.

    “This deal solves more problems than it creates in the intermediate term, and as such, should result in significantly higher estimates and a boost to the shares,” David Maris, an analyst at BMO Capital Markets, stated in a note to clients reported by Bloomberg. “Investors will likely see this as the new CEO executing his ‘change agent mandate.’”



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