Cosmo Pharmaceuticals SpA landed a hefty chunk of upside, that all-too-elusive commodity, by grossing $89.2 million from a sale of Santarus Inc. stock. The transaction will enable the already-profitable company to begin paying dividends to its shareholders.

The Lainate, Italy-based drug delivery specialist disposed of 4.25 million shares, priced at $18.25 per share, Friday. On Monday, Jefferies LLC, which underwrote the offering, exercised its option to purchase an additional 637,500 Santarus shares from Cosmo.

Cosmo's net proceeds from the transaction will amount to about $85.9 million when the seller's commission and legal fees are deducted. Its bookable profit will be almost €60 million (US$77.9 million), its chief financial officer and head of investor relations, Chris Tanner, told BioWorld Today, as the company originally booked the shares at an average price of €1.77 per share.

There is, moreover, plenty of water left in the well. On completion of the transaction, which is due to happen Wednesday, Cosmo will retain almost 3 million Santarus shares, representing 4.63 percent of the San Diego-based firm's stock. At current prices, that holding is valued at approximately $60 million.

The deal gives Cosmo plenty of options in terms of cash management and investing in new projects. "We want to retain an iron reserve of cash, of €20 million to €25 million," Tanner said. The firm exited 2012 with €27.3 million on the balance sheet, having posted a net profit of €19.3 million on revenues of €59.5 million.

It can set aside about €15 million for dividends. "We want to do this in a way that we can hopefully increase them every year," Tanner said. But Cosmo also has about €50 million available for investing in new projects. "We're totally open," he said. "What separates Cosmo a bit from other companies is we're not a science-driven company." Its focus is entrepreneurial. "We do things that make sense."

Cosmo originally accepted 6 million Santarus shares in 2008, as partial payment for a licensing deal involving its ulcerative colitis drug Uceris (budesonide) and its traveler's diarrhea drug rifamycin SV, both of which employ Cosmo's Multi Matrix (MMX) drug delivery technology. The headline potential value of the deal was $87 million, plus royalties. (See BioWorld Today, Dec. 16, 2008.)

It opted to receive subsequent milestones in the form of stock rather than cash, betting that it would benefit twice over should Uceris be successful. "At the time we made the deal with Santarus, we were debating internally whether it would make sense to set up a distribution organization ourselves," Tanner said. Because of the risk involved, it opted instead to find a small partner that really needed and would therefore really back the product. "We were looking for a distribution company that was small and had an existing pipeline that was coming off patent quickly," he said.

A combination of "luck and foresight" has led to Cosmo's big payday. Santarus's stock climbed strongly on the back of a successful appeal last year, which overturned an earlier decision that allowed Par Pharmaceutical Cos., of Woodcliff Lake, N.J., to introduce a generic competitor to its drug for heartburn and acid reflux, Zegerid (omeprazole-sodium bicarbonate).

Coupled to that, Uceris had a strong showing after its commercial launch Feb. 13, notching up $6.6 million in sales during its first six weeks on the market. Santarus' stock (NASDAQ:SNTS) is now up 218 percent in the past year.

Cosmo still retains plenty of upside in the actual partnership. It stands to receive a $5 million milestone on the first $75 million of Uceris sales and another $17.5 million when sales reach $150 million. It will receive a 12 percent royalty on sales up to $120 million and 14 percent on sales above that mark. In addition, it will receive a 10 percent royalty on all sales in return for manufacturing the drug.

The U.S. is the more valuable market for the drug, but it also is progressing through the European approval system in parallel. Ferring Pharmaceuticals SA, of Saint Prex, Switzerland, holds all rights to the drug outside the U.S. and Japan, where it is known as Cortiment. It gained approval in the Netherlands in January – following a successful appeal process – and Tanner said he expects additional approvals to start trickling through in the coming months.

Rifamycin SV already attained the primary endpoint of one Phase III trial, but a second trial has been delayed owing to recent restrictions placed by the Indian government on drug trials in the country, even though the study was to recruit tourists rather than inhabitants of India. Methylene Blue MMX, a colon cancer diagnostic, is due to enter Phase III trials shortly

Like Santarus, Cosmo has enjoyed a strong run of late. Its share price (ZURICH:COPN) grew by 81 percent over the past 12 months and by 52 percent since the start of this year. The company is now valued at CHF704.8 million (US$733.6 million), making its founder, CEO and chairman, Mauro Ajani, a wealthy man. He still holds more than 40 percent of its stock.