Mallinckrodt said today it has agreed to acquire Sucampo Pharmaceuticals for approximately $1.2 billion, including debt, in a deal designed to strengthen the buyer’s specialty pharma business.

The acquisition will add to Mallinckrodt the commercial and development assets of Sucampo—including the marketed constipation treatment Amitiza® (lubiprostone) and a pipeline that includes two rare disease treatments.

Amitiza is a chloride channel activator designed to increase fluid secretion and motility of the intestine, facilitating passage of stool. Amitiza is marketed in the U.S., the U.K., and Switzerland through Takeda Pharmaceutical, and in Japan through Mylan, with Chinese authorities reviewing an Investigational New Drug (IND) application for the drug submitted by Harbin Gloria Pharmaceuticals.

Amitiza—which generated $456 million in 2016 global net sales—is indicated for treatment of chronic idiopathic constipation (CIC) in adults, irritable bowel syndrome with constipation (IBS-C) in women 18 years of age and older, and opioid-induced constipation (OIC) in adult patients with chronic, noncancer pain, including patients with chronic pain related to prior cancer or its treatment who do not require frequent opioid dosage escalation.

The FDA is currently reviewing a supplemental New Drug Application (sNDA) for Amitiza in children 6 to 17 years of age with pediatric functional constipation (PFC). The sNDA received a Priority Review designation and has a Prescription Drug User Fee Act (PDUFA) goal date of January 28, 2018.

Mallinckrodt’s commercial portfolio will also be expanded with global rights to Rescula® (unoprostone isopropyl ophthalmic solution). Rescula generates annual net sales of approximately $9 million, the buyer said.

Rare Disease Pipeline

Sucampo’s rare disease pipeline includes VTS-270, a mixture of 2-hydroxypropyl-β-cyclodextrin (HPβCD) that is in Phase II/III study for Niemann-Pick disease type C (NPC) and, according to Sucampo, is distinguished from other HPβCD mixtures through a specific compositional “fingerprint.”

Sucampo acquired VTS-270 earlier this year when it purchased rare disease drugs firm Vtesse for $200 million in cash and shares. VTS-270 has received both Orphan Drug and Breakthrough designations from the FDA, as well as Orphan Drug status from the European Medicines Agency (EMA). And because VTS-270 has also been designated as a rare pediatric disease treatment by the FDA, Mallinckrodt said it expects to receive a Priority Review Voucher should the agency approve its New Drug Application (NDA) for the drug. Mallinckrodt said it expects to file that NDA in 2018 and receive approval in 2019.

The other rare disease candidate in Sucampo’s pipeline is CPP-1X/sulindac, a Phase III combination treatment for familial adenomatous polyposis (FAP) that Sucampo has licensed from Cancer Prevention Pharmaceuticals (CPP) for commercialization in North America.

Mallinckrodt expects to complete the Phase III trial in 2018. Should data prove positive, Mallinckrodt said, it will acquire the exclusive option to obtain North American commercial rights for an unspecified “nominal” fee, with CPP retaining rights to the rest of the world. Mallinckrodt expects to file an NDA for the combination therapy early in 2019, with approval expected that year.

Peak U.S. potential net sales for the CPP-1X/sulindac combo are estimated at more than $300 million, Mallinckrodt said—with the company agreeing to share part of its profits from commercialization of CPP-1X/sulindac with CPP.

The CPP-1X/sulindac combination has received the FDA’s Orphan Drug and Fast Track designations, as well as orphan drug status by the EMA.

“Mallinckrodt's acquisition of Sucampo is the latest milestone toward our vision of becoming an innovation-driven specialty pharmaceutical growth company focused on improving outcomes for patients with severe and critical conditions,” Mallinckrodt CEO and president Mark Trudeau said in a statement.

“A Natural Partner”

Added Sucampo chairman and CEO Peter Greenleaf: “With the addition of its significant resources and expertise, we believe Mallinckrodt is a natural partner to accelerate the development of our rare disease assets in NPC and FAP, and to continue to provide Amitiza for patients suffering from constipation-related disorders.”

Mallinckrodt said it expects the acquisition of Sucampo to add at least 30 cents to adjusted diluted earnings per share, a non-GAAP measure, and at least double that amount in 2019 should the deal close in the first quarter of 2018.

However, Mallinckrodt has not issued guidance to investors about the projected effect of the deal on GAAP diluted earnings per share, citing “the inherent difficulty of forecasting the timing or amount of items that would be included in calculating such impact.”

Last month, citing strong Amitiza sales, Sucampo raised its 2017 total revenue guidance to an adjusted EPS of $1.10 to $1.15, from $1 to $1.10. Total revenue guidance was also raised to between $250 million and $255 million from $220 million to $230 million, while adjusted net income guidance was increased to between $63 million and $68 million, from $56 million to $66 million.

Under the deal, a Mallinckrodt subsidiary, Sun Acquisition Co., will commence a cash tender offer to purchase all outstanding shares of Sucampo common stock for $18 a share—a roughly 6% premium over the stock’s Friday closing price of $17. The stock’s price has risen about 14% since December 6, the day before Bloomberg News reported that Sucampo was considering being acquired in response to emerging as a takeover target.

Mallinckrodt said it expects to fund its acquisition through its existing revolving credit facility, a new secured term loan facility, and/or cash on hand.

The acquisition has been approved by the boards of both companies. Sucampo shareholders holding approximately 32% of the company’s outstanding stock have agreed to tender their shares. The deal is subject to the tender of a majority of Sucampo outstanding shares, as well as customary closing conditions, including expiration of the applicable waiting period under the Hart–Scott–Rodino Antitrust Improvements Act.

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