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Santarus Clause: Patent Expiry Not a Hitch in $2.6B Salix Pharmaceuticals Deal

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By Randy Osborne
Staff Writer

Salix Pharmaceuticals Ltd.’s $2.6 billion buyout of Santarus Inc. for $32 per share in cash provides entry into the primary care physician space, while bringing aboard more products – albeit a couple that are facing patent expirations fairly soon.

Carolyn Logan, president and CEO of Raleigh, N.C.-based Salix, told investors during a conference call that the company was particularly jazzed about “being able to access that market now, because we realized that with Xifaxan [rifaximin, at the 550-mg dose] there is a lot of potential there in hepatic encephalopathy [HE] patients. Our market research has shown us that somewhere in the neighborhood of 25 to 30 percent – could be a little more than that – is treated by the primary care physician audience. Up until now, we have not really had much of an access to that market.”

Approved by the boards of both firms, the merger would create the biggest gastroenterology-focused specialty pharma company in the U.S., with estimated pro forma total product revenue of $1.3 billion from 22 marketed products.

Salix paid about a 36 percent premium over San Diego-based Santarus’ Thursday closing price of $23.53 per share, and about 39 percent over the average closing price for the past 30 days.

In a research report, Leerink Swann analyst Jason Gerberry called Santarus “fairly valued.” The merger leaves Salix less reliant on Xifaxan, a non-antibiotic antibacterial approved for traveler’s diarrhea and HE. Steadily rising sales with Xifaxan could go even higher if Salix is able to expand the label into irritable bowel syndrome (IBS) and Crohn’s disease.

Xifaxan is in the final stages of a Phase III retreatment study in patients with diarrhea-predominant IBS (IBS-D) to satisfy issues cited in a 2011 FDA complete response letter. The trial was designed to test rifaximin 550 mg three times daily for 14 days in subjects with IBS-D who respond to an initial course of rifaximin for 14 days. The primary endpoint is the proportion of subjects who responded to repeat treatment in both IBS-related abdominal pain and stool consistency during the four-week treatment-free follow-up period compared to placebo. Data are due at the end of the year or early in 2014, and could lead to an FDA decision by around the middle of 2014. (See BioWorld Today, May 23, 2013.)

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.)

‘Comfortable’ About Glumetza, Zegerid

David Ansellem, analyst with Piper Jaffray, asked if Salix was “at all concerned about the trajectory of the Uceris prescriptions, which recently look to have slowed.”

Logan said Salix is “anxious to be able to get this transaction closed in the first part of 2014, and get our people trained on Uceris.” The drug, she said, “will greatly benefit from an increased presence in gastroenterology,” she added. “We’re seeing the product works well, and physicians who try it seem to adopt it rather quickly. Our market research tells us that they see efficacy pretty rapidly with this product.”

Ansellem also asked about Glumetza (metformin hydrochloride extended-release tablets) for Type II diabetes, the Santarus compound that 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.

“Uceris has patent protection that should protect it out until 2020,” Logan said, acknowledging that the other two “are going to be lost to generics in 2016, but we’re aware of it and can plan for it, and we’re comfortable with that.”

Ansellem also asked about the thinking behind taking on such products as Santarus’ Ruconest (conestat alpha) for hereditary angioedema (HAE), which awaits an FDA approval decision by mid-April, given that HAE is “out of your traditional wheelhouse.” Santarus has disclosed plans to develop the compound in acute pancreatitis, too.

“As far as Ruconest [goes], we don’t know a lot about it at this time,” Logan said. “I’m sure you’re familiar with the term ‘jumping the gun.’ In between announcing this deal and closing, we really can’t have a lot of interaction with Santarus.”

With partner Pharming Group NV, of Leiden, the Netherlands, Santarus had more news from an open-label repeat treatment study with Ruconest. An open-label extension of the pivotal Phase III trial, its results were to be featured at the 2013 American College of Allergy, Asthma & Immunology Annual Scientific Meeting.

In the experiment, Ruconest was administered for the treatment of 224 repeat acute angioedema attacks in 44 patients with HAE following initial treatment in the trial. The companies said Ruconest improved symptoms of HAE, with similar results for repeated treatments.

Salix’s stock (NASDAQ:SLXP) closed Friday $84, up $12.69, or 17.8 percent. Shares of Santarus (NASDAQ:SNTS) ended the day at $31.95, up $8.73, or 37.6 percent.