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Gutsy move: Forest buying Furiex for $1.1B in cash to build on GI presence

By Randy Osborne, Staff Writer

On a busy Monday when other merger & acquisition (M&A) tries worked out less well for the would-be suitors, Forest Laboratories Inc. signed a definitive agreement to take over Furiex Pharmaceuticals Inc. for $95 per share, or about $1.1 billion in cash, and up to $30 per share – about $360 million – in a contingent value right (CVR) that could be payable based on what happens with Furiex’s lead product eluxadoline for diarrhea-predominant irritable bowel syndrome (IBS-d).

Morrisville, N.C.-based Furiex in February disclosed top-line results from two pivotal phase III trials that met the primary endpoints of composite response based on simultaneous improvements in stool consistency and abdominal pain. Regulators in the U.S. and Europe had agreed on the endpoints, and Furiex said it was on track to submit a new drug application for eluxadoline by the end of the third quarter of this year.

Along with the $95 per share, Forest will pay more, depending on how eluxadoline, a first-in-class, locally-acting mu opioid receptor agonist and a delta opioid receptor antagonist, is designated. If the best possible CVR milestone is hit, the companies said, the cash and CVR payout together will be $125 per share, or about $1.5 billion in total. If eluxadoline receives FDA approval and is not scheduled as a controlled drug by the Drug Enforcement Administration, holders of the CVR will get $30 per share or about $360 million altogether. If the compound ends up as a schedule 4 or schedule 5 controlled drug, holders of the CVR will get $10 per share (about $120 million) or $20 per share (about $240 million), respectively.

As part of the arrangement, Forest expects to divest Furiex's royalties on Nesina (alogliptin) and Priligy (dapoxetine) to Royalty Pharma Inc., of New York, for about $415 million, which, after tax, will drop New York-based Forest's purchase price by about $315 million, though the buyout is not contingent on the Royalty Pharma deal.

Furiex’s stock (NASDAQ:FURX) was up by $22.76, or more than 28 percent, on the news, trading at $102.91. Forest’s shares (NYSE:FRX) were selling for $90.56, up 72 cents, on word of the deal, which builds on the company’s gastrointestinal (GI) therapy franchise, helped along by the buyout of Aptalis Pharma Inc., of Mont-Saint-Hilaire, Quebec, for $2.9 billion at the first part of this year. Forest’s GI anchor product is Linzess (linaclotide) for IBS. A first-in-class guanylate cyclase-C agonist that acts locally in the intestine with minimal systemic exposure, Linzess was cleared in the summer of 2012 for use in the dual indications of chronic idiopathic constipation and IBS with constipation in adults. It’s partnered with Ironwood Pharmaceuticals Inc., of Cambridge, Mass.

Other M&A activity making headlines Monday came with less successful outcomes, at least for now. New York-based Pfizer Inc. rebuffed a record £58.8 billion (US$99 billion) bid from Astrazeneca plc, of London. Also, Meda AB, of Goteborg, Sweden, spurned a second takeover offer from Mylan Inc., of Pittsburgh. “All contacts between Meda and Mylan have been terminated without further actions,” Meda said in a prepared statement. “The board's decision is based on a strong belief in the continued potential of Meda as a stand-alone company and the assumption that a transaction cannot be completed as it lacks sufficient support from Meda's largest shareholder.”

See Tuesday's BioWorld Today for More on This Story.