Endo Scores with $2.6B Offer for Auxilium, Which Ends QLT Deal

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A sweeter offer made the difference for Endo International in its pursuit of Auxilium Pharmaceuticals, which agreed to be bought for $2.6 billion after terminating a planned merger at a much lower price with Canadian drug developer QLT, the companies said today.

The purchase price was $400 million higher than Endo’s initial $2.2 billion bid, disclosed September 16 and rejected by Auxilium’s board as undervaluing the company.

Until the initial offer, Auxilium had been carrying out plans to merge with QLT in a $345 million stock deal designed to create a larger specialty biotech domiciled in lower-tax Canada. QLT is based in Vancouver, BC. Instead, Auxilium will pay QLT a $28.4 million fee for terminating their deal, and give up on earlier plans to slice its taxes through an inversion merger.

One aspect of the deal that didn’t change from last month is Endo’s plan to achieve annual cost-savings or “synergies.”

Unlike last month, Endo quantified its planned annual savings as $175 million—or more than double the savings it projected last month, when Auxilium was still planning to combine with QLT.

On September 9, Auxilium said it would eliminate “approximately 30%” of its workforce—almost 200 jobs—in a restructuring expected to save the drug developer at least $75 million in annual operating expenses.

Endo expects to achieve that $175 million in annual synergies in the first year after the deal closes.

The boards of both Endo and Auxilium have approved the deal, which is expected to close in the first half of 2015. The acquisition is subject to approval by Auxilium's stockholders, regulatory approval in the U.S. and elsewhere, and other customary closing conditions.

The deal would create a combined company with a broader offering of urology and orthopedic products from Auxilium that Endo considers to be natural complements to its current men's health and pain products.

“By adding Auxilium's complementary commercial portfolio, we believe this transaction is aligned with our strategy of pursuing accretive, value creating growth opportunities,” Rajiv De Silva, Endo’s president and CEO, said in a statement. “We intend to leverage Auxilium's leading presence in men's health, as well as our R&D capabilities and financial resources to accelerate the growth of Xiaflex® and Auxilium's other products.”

Endo said it expects to drive increased adoption and enhance the performance of Xiaflex (collagenase clostridium histolyticum), Auxilium's adult Dupuytren's contracture drug—as well as speed up development of the product in potential new indications. 

In additional, Endo said it intends to leverage its resources to generate more revenue from Auxilium's other products, including Testopel® (testosterone pellets) and the erectile dysfunction drug Stendra® (avanafil).

“Endo believes the combined company will be well positioned to drive organic growth across its portfolio and to capitalize on additional future strategic M&A opportunities,” the company stated.

Endo’s acquisition amounts to $33.25 per Auxilium share. That represents a 55% premium above Auxilium’s closing price on Sept. 16, the day Endo’s offer for Auxilium became public. Shareholders will be asked to decide how to carry out the transaction—all equity, all-cash, or a 50–50 combination of the two.

Endo said it intends to fund the cash portion of the transaction through a combination of existing cash on hand and committed debt financing from Citi.

QLT Chairman Jason Aryeh issued a separate statement expressing disappointment that the original deal did not reach completion.

“In light of this development, we will immediately re-engage in our assessment of all potential strategic options,” Aryeh stated.








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