Salix Pharmaceuticals (NASDAQ:SLXP) is merging with a subsidiary of Italian drug company Cosmo Pharmaceuticals in a deal that brings Salix new drug products and also reduces the Raleigh company’s taxes.
The definitive merger agreement was announced Tuesday evening.
Under the terms of the deal, Salix will combine with Cosmo Tech, an Ireland-based subsidiary of Cosmo. That combined company will change its name to Salix Pharmaceuticals, plc. When the deal closes, Salix shareholders are expected to own slightly less than 80 percent of the ordinary shares of Salix Pharmaceuticals, plc.
Salix, which specializes in gastrointestinal drugs, said the deal brings to the new company Cosmo products that complement Salix’s existing drug portfolio. Cosmo’s drug pipeline includes gastrointestinal treatments for conditions such as inflammatory bowel disease, colon infections as well as diagnostics for the colon. Cosmo is the inventor and Uceris, one of the products Salix added to its own portfolio when it acquired Santarus last year in a $2.8 billion deal. Santarus held U.S. rights to the ulcerative colitis treatment and Cosmo supplied the company the drug. Under the proposed deal, Cosmo will continue to supply Uceris to the new Salix but Salix will owe no longer owe royalty or milestone payments on the product.
The new Salix will will own Cosmo’s U.S. patents for the drugs rifamycin MMX, methylene blue MMX and Uceris. Salix will also have the right to negotiate products that Cosmo or its affiliates seek to develop or commercialize in the United States. Salix said that Rifamycin MMX has “substantial opportunities” for conditions of the colon, including diverticulitis, a condition in which small pouches in the inner lining of the intestine become inflamed or infected. The deal also brings to Salix methylene blue MMX, tablets used to help detect colon cancer.
“The new corporate structure greatly enhances our ability to compete for licensing deals and acquisitions, and improves the economics of future business development opportunities for Salix,” Salix CEO Carolyn Logan said in a statement. “Further, by adding multiple new and complementary product opportunities, to which we will be able to bring our proven expertise in development and commercialization, we expect these new pipeline additions to diversify and grow our future revenue base.”
The Salix/Cosmo deal comes as a growing number of U.S. pharma and medical device companies pursue acquisitions of European-based companies in an effort to lower their tax rate. Pfizer’s (NYSE:PFE) bid to acquire AstraZeneca (NYSE:AZN) was rebuffed. But Minnesota-based medical device giant Medtronic (NYSE:MDT) last month reached a $43 billion agreement to buy Ireland-based Covidien.
Salix and Cosmo expect to to close the deal in the fourth quarter.
