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Santarus ‘Fairly Valued’ in $2.6B Merger with Salix

By Randy Osborne

Staff Writer

Salix Pharmaceuticals Ltd. and Santarus Inc. disclosed late Thursday the merger agreement for Salix to acquire all of the outstanding common stock of Santarus for $32 per share in cash (without interest), an all-cash transaction that values Santarus at about $2.6 billion.

Salix, of Raleigh, N.C., paid about a 36 percent premium over San Diego-based Santarus' closing price of $23.53 per share, and about 39 percent premium over the average closing price for the past 30 days. The companies expect to close the deal, approved by the boards of both, in the first quarter of next year.

Late morning Friday, Santarus shares (NASDAQ:SNTS) were trading at $31.96, up $8.74, or 37 percent. Salix’s stock (NASDAQ:SLXP) were selling at $80.71, up $9.40, or 13 percent.

Leerink Swann analyst Jason Gerberry, in a brief report, called Santarus “fairly valued.” For Salix, the acquisition was “a good move not to be so reliant” on Xifaxan (rifaximin), a non-antibiotic antibacterial drug currently approved for traveler's diarrhea and hepatic encephalopathy. Steadily rising sales with Xifaxan could go even higher if Salix is able to expand the label into irritable bowel syndrome and Crohn's disease.

Meanwhile, in May, Salix said its two pivotal studies of budesonide foam in active to moderate ulcerative proctitis or ulcerative proctosigmoiditis – forms of ulcerative colitis (UC) – hit the primary endpoints, as expected, with a statistically significant number of patients in the treatment arm achieving clinical remission vs. placebo. Santarus’ budesonide in oral form was approved in January, and the company launched the product, branded Uceris, the following month. (See BioWorld Today, Jan. 16, 2013, and May 23, 2013.)

Santarus also has Glumetza (metformin hydrochloride extended-release tablets) for Type II diabetes, which could face generic competition in February 2016, though Depomed Inc., of Menlo Park, Calif., filed a lawsuit in April seeking to prevent Watson Pharmaceuticals Inc., of Parsippany, N.J., from commercializing a generic version of Glumetza.

Also in Santarus’ hopper is Zegerid (omeprazole-sodium bicarbonate), an immediate-release proton pump inhibitor approved in upper gastrointestinal diseases and disorders, which could be in the ring with its first generic opponent the same year as Glumetza.

The merger would create the biggest gastroenterology-focused specialty pharma firm in the U.S., giving Salix a strong sales force in that space. For this year, the estimated pro forma total product revenue is $1.3 billion, from 22 marketed products.