On its way to the altar with Canadian drug developer QLT, Auxilium is being propositioned by another would-be partner dangling before it a tax-slicing “inversion” merger—Endo International, which yesterday offered to buy the troubled biotech.
Endo’s offer comes just a week after 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 said it could deliver even more savings. It did not detail those extra savings, other than to say in a statement that they would be “significant synergy opportunities given the complementary nature of the companies' product portfolios and geographic locations.”
“Auxilium's 12 FDA approved products in urology, orthopedic, and other areas are natural complements to the men's health and pain products in Endo's pharmaceuticals portfolio,” Endo added.
It said the combined company would be well-positioned to grow through M&A as well as organically.
“We expect that Endo's leading presence in men's health, combined with our R&D capabilities and considerable financial resources will accelerate the growth of Xiaflex® and Auxilium's other products, enhancing the value of the combined company's portfolio,” stated Rajiv De Silva, Endo’s president and CEO.
Under De Silva, Endo has been on a buying spree. This year, the company snapped up Canadian-based Paladin Labs for about $2.7 billion cash-and-stock, then redomiciled the combined company in even-lower-tax Ireland.
In June, 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.
In between, Endo acquired acquired specialty generics company Boca Pharmacal through a subsidiary for about $225 million cash; bought Mexico City-based Grupo Farmaceutico Somar for an undisclosed sum; snapped up global rights to the migraine and headache drug Sumavel® DosePro® and its needle-free delivery system from Zogenix for $85 million plus milestones and royalties; and completed the sale of its branded pharmaceutical early-stage drug discovery platform to AsanaBioSciences for undisclosed upfront and milestone payments.
Endo also tried to buy NuPathe, which instead chose a higher $144 million-plus-milestones offer from Teva Pharmaceutical Industries.
Until now, Auxilium has 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.
Auxilium cited the need to cut costs in advance of a QLT merger last week when it announced the 30% job cut, which would reduce the reported total workforce by 191 positions. Adrian Adams, Auxilium’s CEO and president, last week blamed the restructuring on “significant challenges this year” that include slumping sales of the company’s testosterone replacement gel Testim, indicated for the topical treatment of hypogonadism.
Canaccord Genuity analysts Corey Davis, Ph.D., and Lidia Liu expressed support for the Auxilium deal over the QLT offer in a note to investors: “The Endo offer gives AUXL [Auxilium] holders a far superior outlook to anything that the QLT acquisition could afford in the near-term and one the AUXL board won’t be able to ignore,” Dr. Davis and Liu wrote.
At $28.10 per share, Endo’s is offering a 31% premium to Auxilium's closing price Tuesday, and a 40% premium to the average closing price of Auxilium shares for the previous 30 days.
Endo said it would buy Auxilium for an approximately equal mix of cash and Endo stock, in a deal to be funded through both existing cash on hand and debt financing.
“Endo stands ready to engage immediately with Auxilium, complete our confirmatory diligence, negotiate a definitive agreement and complete this exciting transaction,” De Silva added.
