Ireland-based Endo has made a $2.6bn cash-and-stock offer for Auxilium – which has been approved by the boards of both companies – that will add the latter’s portfolio of testosterone replacement therapies to Endo fast-growing speciality pharma business.
The deal comes after Auxilium hatched a $345m tax-inversion deal with QLT that would have allowed it to reduce US corporation tax exposure by transferring its domicile to Canada, QLT’s home market. A $28m termination fee paid to QLT by Auxilium is cold comfort for the Canadian firm, a former biotech star which is operating largely as a shell company after selling off its main assets in recent years.
Endo – which is itself the product of a tax inversion deal after buying Ireland-based Paladin Labs last year – first approached Auxilium with a $2.2bn offer in September but was rebuffed on the grounds that the bid undervalued the US company.
Bumping up the offer by $400m – coupled with the US government’s recent efforts to strip out the financial benefits of tax inversions – has swung the deal.
Auxilium’s main products are testosterone replacement products Testim gel and the implantable Testopel – expected to bring in between $255m and $280m in sales this year – as well as Xiaflex (collagenase clostridium histolyticum), the first non-surgical treatment for curved penis condition Peyronie’s disease which could add another $80m.
In a statement, Endo said the takeover would create a “leading specialty healthcare company”, adding that Auxilium’s products are “natural complements to [our] current men’s health and pain products.”
Endo also sells a testosterone replacement therapy called Aveed, although the prospects for all products in this category are somewhat clouded in the US after an FDA advisory committee concluded last month they should be restricted in their use as they are currently over-prescribed. They should be reserved for medical conditions and not used to boost flagging sex drive or low energy levels, said the panel.
The Irish company – which also sells generic drugs – has had a remarkably acquisitive year to date, spending more than $4bn on a string of deals including takeovers of Dava Pharma and Grupo Farmaceutico Somar and individual products, as well as completing the Paladin merger.
The company’s strategy is akin to that of Valeant – currently in hot pursuit of Allergan – and involves buying up companies with profitable product portfolios and stripping out costs. The Auxilium deal provides an opportunity to reduce annual costs by around $175m, according to Endo.