Cosmo Rejected Salix Complete Takeover Approach, Cosmo CEO Says

Salix Pharmaceuticals Ltd., the drugmaker buying patents from Cosmo Pharmaceuticals SpA in a deal that will allow it to move from the U.S., initially proposed buying the Italian company outright.

Cosmo rejected an approach for the whole company because it wasn’t in the best interests of shareholders, Chief Executive Officer Alessandro Della Cha said today in a telephone interview.

Salix, based in Raleigh, North Carolina, agreed this week to buy patents to three gastrointestinal drugs from Lainate, Italy-based Cosmo for about $2.7 billion in stock, allowing the U.S. company to move to Ireland and lower its tax bill.

“We were approached by Salix for a prospective overall takeover, which we thought didn’t make much sense for us, because we see ourselves very much on the value-creation side,” Della Cha said. “We really didn’t get to the point of discussing any offer, because we ruled out the full takeover immediately.”

Instead, Cosmo executives met in Chicago with Salix representatives and proposed a so-called tax inversion, which was accepted, Della Cha said. The method is becoming more popular with U.S. companies seeking an overseas address to lower their tax rates. In the medical field, AbbVie Inc. is bidding for Shire Plc to execute a similar inversion.

Salix will gain Cosmo’s U.S. patents for Uceris, a treatment for ulcerative colitis, the experimental antibiotic rifamycin MMX and methylene blue MMX, an experimental dye for detecting pre-cancerous lesions in the colon. Salix also will have first right of refusal over any gastrointestinal drugs that Cosmo seeks to market in the U.S.

To allow for a base in Ireland, the deal is structured so that Cosmo’s Irish subsidiary buys Salix, and investors in Salix receive one share of the new company for each Salix share.

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