Furiex Diarrhea Drug May Lure Takeover by Salix: Real M&A
Furiex Pharmaceuticals Inc. (FURX), the maker of a gastrointestinal medicine that’s looking for a buyer, may be a good fit for Salix Pharmaceuticals Ltd., its larger competitor 20 minutes down the road.
Furiex, whose shares soared after results showed its eluxadoline treatment alleviated abdominal pain from irritable bowel syndrome, has contacted drugmakers to gauge interest in a deal with the Morrisville, North Carolina-based company, people familiar with the matter said last month. Raleigh, North Carolina-based Salix may seek a takeover because it could sell the drug with its own remedies, Ladenburg Thalmann & Co. said.
With the company on track to submit the treatment for U.S. approval in June, Furiex could appeal to Actavis Plc, which will acquire complementary medicines through its planned purchase of Forest Laboratories Inc., said Cowen Group Inc. Furiex’s premature ejaculation drug, Priligy, also could draw takeover interest from companies with erectile dysfunction medicines, said Redmond Asset Management LLC, which estimated a buyer could offer about $1.5 billion, more than a 50 percent premium.
“You could definitely see how this would be a logical fit for Salix (SLXP),” Scott Redmond, founder of Richmond, Virginia-based Redmond, which oversees about $225 million, said in a phone interview. “If I were advising Salix, I’d advise them to act quickly before any of the big pharma notice Priligy. Somebody ought to take them.”
Tony Plohoros, a representative for Furiex, declined to comment. G. Michael Freeman, a spokesman for Salix, said the company had no comment when asked if it was considering an acquisition of Furiex.
Furiex is working with Bank of America Corp. to find a buyer, said people familiar with the matter, who asked not to be named because the plans are private. It marks the second time the company has tried to sell itself, according to two of the people.
The drugmaker said Feb. 4 that studies showed eluxadoline alleviated diarrhea and IBS pain and met regulatory safety standards. The shares surged 130 percent that day and reached an all-time high of $113.55 on Feb. 5. They climbed 2.6 percent to $92.63 today.
Salix, which makes products targeting digestive ailments, would be an obvious buyer for Furiex, said Matt Kaplan of Ladenburg. The $7.1 billion company has the resources and infrastructure to market eluxadoline, the analyst said.
“Anyone that’s in the GI or pain space as well, could be interested. Companies like Salix,” Kaplan said in a phone interview. “There’s not much integration you need to do.”
The drug could achieve annual revenue of as much as $700 million three years after it hits the market, Kaplan estimated. Last year, the company reported $71 million in sales, according to data compiled by Bloomberg.
Forest Labs, which agreed last month to sell itself to Dublin-based Actavis, would fit with Furiex because it’s already marketing a treatment for another type of IBS and the company could target the same doctors, said Edward Nash, an analyst at Cowen.
“Acquiring Forest is a lot to iron out, but there would be a lot of value” in adding Furiex, he said. “These companies can’t be sleeping and dealing with internal issues when there’s opportunities out there.”
Takeda Pharmaceutical Co. (4502) could also be a buyer, as it has a partnership with Furiex for a Type II diabetes drug, Nash said. While Osaka, Japan-based Takeda has an agreement to market another company’s IBS drug, its portfolio of treatments would fit “hand-in-hand” with Furiex’s, he said.
Representatives for Actavis and Takeda declined to comment when asked if they were considering an acquisition of Furiex.
Large pharmaceutical companies with erectile dysfunction drugs may also be interested in buying Furiex to gain access to its Priligy drug for premature ejaculation, according to Redmond.
Furiex’s drug is approved in more than 60 countries in Europe, Asia and Latin America, according to the company’s website. As much as 30 percent of men are affected with premature ejaculation at some point in their lives, compared with 10 to 20 percent for erectile dysfunction, according to Furiex.
“For anyone with a big ED drug, that would be a great thing in their pocket,” Redmond said. He estimated that a large drugmaker could offer $1.5 billion for Furiex and generate an attractive return. The company’s market value yesterday was $958 million, data compiled by Bloomberg show.
Potential buyers may prefer to wait for the U.S. Food and Drug Administration to approve Furiex’s drug application to avoid the risk of having to do another trial if it’s denied, according to Andrew Berens, an analyst with Bloomberg Industries.
“It’s kind of a weird time to do a deal like that,” he said in a phone interview. “If you’re submitting to the FDA right now, no large pharma company’s really going to want to take that risk.”
Furiex will have to do a deal soon, whether by selling itself or developing a partnership to market its new IBS drug, said Ladenburg’s Kaplan. The company doesn’t have enough cash and projected revenue to cover the costs to roll out the new IBS drug, Kaplan said.
“They need to do something eventually if they’re going to market,” he said.
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