West Coast Editor

About this time last year, Xcel Pharmaceuticals Inc. bought the rights to the Phase III-ready epilepsy drug retigabine from Viatris GmbH and Co., of Frankfurt, Germany.

Less than two weeks later, in an unrelated transaction, Valeant Pharmaceuticals Inc. disclosed an agreement to acquire Amarin Pharmaceuticals Inc., the U.S. subsidiary of London-based Amarin Corp. plc, thus gaining - among other assets - the late-stage drug Zelapar (selegiline) for Parkinson's disease.

Now, the mutual interest in neurology that caused them to shop overseas has brought Xcel, of San Diego, and Valeant, of Costa Mesa, Calif., together in a buyout deal that would have Valeant paying about $280 million for Xcel.

"It fit our strategic direction in a number of different ways," said Jeff Misakian, vice president of investor relations for Valeant, a global specialty pharma company. Taking over Xcel "adds to our U.S. business immediately," which has in recent years been a goal, with less attention on central and eastern Europe than in previous years, he said.

"It also helps us expand our neurology franchise," he said, a goal helped obviously by the Amarin acquisition. (See BioWorld Today, Feb. 13, 2004.)

"We're expecting to launch Zelapar by the middle part of this year," Misakian told BioWorld Today.

The Xcel deal, approved by the boards of both companies and expected to close in the next few weeks, includes retirement of about $44 million of Xcel debt, with Valeant paying either $280 million in cash if it is able to complete an equity offering, or $230 million in cash and $50 million in stock.

Valeant's proposed offering involves up to 7.2 million shares at an unspecified target price, pursuant to a shelf registration, with a 30-day option for the underwriter to buy up to about 1.1 million more shares. The prospectus related to the offering was filed Wednesday. At Valeant's closing price that day of $24.31, the offering would raise about $175 million, excluding overallotments.

Retigabine is a new chemical entity that combines two modes of action - selective opening of potassium channels and enhancement of transmission of gamma-aminobutyric acid, an amino acid produced in the brain. Phase III trials are expected to begin in the next few months, and Valeant targets 2009 for launch.

Also in the Xcel hopper are Diastat (diazepam) for acute repetitive epileptic seizures outside of a hospital setting, and Migranal (dihydroergotamine), a nasal spray used for acute migraines. Xcel's product line sold $45.9 million in the nine months ending Sept. 30.

Would the deal have gone ahead without retigabine?

"I wouldn't say that," Misakian said. "The entire package was attractive to us."

Xcel has 94 sales people. Upon closing of the takeover deal, Valeant's sales force will total 200, and the buyout is expected to be "modestly accretive" to earnings this year, excluding the estimated $120 million impact of in-process research and development.

Costs to develop retigabine are expected to make the transaction dilutive until the drug's anticipated launch in 2009, said Valeant, which focuses on nine global brands in three therapeutic areas - neurology, dermatology and infectious disease. Sales for the nine months ending Sept. 30 totaled $431.1 million, a jump of 16 percent over the period last year.

A decision about whether Xcel will be relocated has not been made public, and Misakian said some details could not be discussed because of the pending offering. Any Xcel partnerships, such as the one with Chapel Hill, N.C.-based Pozen Inc. for the migraine drug MT 300, will continue to be maintained through milestone payments, he said.

In 2003, Pozen received a not-approvable letter for MT 300 because it failed to achieve statistical significance on secondary endpoints, relief of nausea and sensitivity to light and sound at two hours. The product did meet its sustained pain-relief primary endpoint. Pozen has responded to the FDA and continues to pursue approval of MT 300. (See BioWorld Today, Oct. 21, 2003.)

More guidance on Valeant's buyout of Xcel is expected as part of Valeant's fourth-quarter financial results, due later this month. Bear Stearns & Co. in New York is advising Valeant in the deal and is the sole book-running manager of the offering.