Forest Laboratories To Buy Furiex Pharma For Up To $1.46 Bln

(RTTNews) - Forest Laboratories, Inc. (FRX) has agreed to acquire Furiex Pharmaceuticals Inc, (FURX) for up to $1.46 billion, including about $1.1 billion in cash, the two companies said Monday.

Forest Laboratories noted that the acquisition will add global rights to eluxadoline, Furiex's lead product, and bolster its gastroenterology business. Shares of Furiex are gaining almost 31 percent in pre-market trades.

Under the deal, Forest Laboratories will for $95 per share in cash to Furiex shareholders, representing an 18.5 percent premium to Furiex's closing stock price of $80.15 on Friday.

Forest Laboratories will also pay up to $30 per share, or about $360 million in aggregate, in a contingent value right or CVR that may be payable based on the status of eluxadoline as a controlled drug following its approval.

Forest Laboratories is itself in the process of being acquired by specialty pharmaceutical company Actavis plc (ACT) for about $25 billion. Actavis has consented to Forest's acquisition of Furiex and supports the transaction.

Morrisville, North Carolina-based Furiex is on track to submit a New Drug Application or NDA for eluxadoline by the end of the third quarter of 2014.

On realization of the optimal CVR milestone, the combined cash and CVR consideration payable in the proposed transaction will be $125 per share, or about $1.5 billion in the aggregate. If eluxadoline receives FDA approval and is not scheduled as a controlled drug by the DEA, holders of the CVR will receive $30 per share or about $360 million in the aggregate.

If eluxadoline is designated as a Schedule 4 or Schedule 5 controlled drug by the Drug Enforcement Administration or DEA, holders of the CVR will receive $10 per share or about $120 million in the aggregate, or $20 per share or about $240 million in the aggregate, respectively.

Forest Laboratories also entered into a deal with New York-based Royalty Pharma to sell Furiex's royalties on diabetes drug alogliptin and premature ejaculation treatment drug Priligy to Royalty Pharma for about $415 million, upon successful completion of Forest's acquisition of Furiex. However, Forest's acquisition of Furiex is not contingent on its agreement with Royalty Pharma.

Brent Saunders, Chief Executive Officer and President of Forest Laboratories, said, "The acquisition of Furiex builds on our growing position in gastroenterology and helps to create a leading GI company within Forest. It is a natural extension of our GI business following our $2.9 billion acquisition of Aptalis earlier this year."

Forest Laboratories noted that Eluxadoline is complementary to Linzess for irritable bowel syndrome with constipation or IBS-C and chronic idiopathic constipation or CIC, and additive to Forest's GI Treatments acquired in its acquisition of Aptalis. With eluxadoline, the company expects to have one of the broadest product offerings for the $38 billion GI disease market.

Eluxadoline is a first-in-class, locally-acting mu opioid receptor agonist and a delta opioid receptor antagonist for treating symptoms of diarrhea-predominant irritable bowel syndrome or IBS-d, which affects about 28 million patients in the U.S. and Europe.

In February, Furiex announced top-line results indicating that its two pivotal Phase III clinical trials evaluating the efficacy and safety of eluxadoline in the treatment of IBS-d met both the U.S. Food and Drug Administration's as well as the European Medicines Agency's formally agreed-upon primary endpoints of composite response based on simultaneous improvements in stool consistency and abdominal pain.

Forest Laboratories expects to use its cash on hand to fund the acquisition of Furiex and close the deal in the second or third quarter of 2014. The transaction is subject to pending regulatory review as well as approval by Furiex's shareholders, and is not expected to affect the timing of Actavis' previously announced acquisition of Forest Laboratories.

Covington & Burling LLP served as Forest's legal counsel, while Furiex was advised by Kirkland & Ellis LLP and Wyrick Robbins Yates & Ponton LLP. Royalty Pharma was advised by Goodwin Procter LLP. BofA Merrill Lynch and Credit Suisse acted as financial advisors to Furiex.

FRX closed Friday's trading at $89.84. In Monday's pre-market, the stock is up $1.94 or 2.16 percent to $91.85.

FURX closed Friday's trading at $80.15. In Monday's pre-market, the stock is up $24.82 or 30.97 percent to $104.97.