Morrisville-based Furiex Pharmaceuticals, which had reportedly been shopping itself to potential buyers since February, has found a suitor.
The 25-employee company is being acquired by New York-based Forest Laboratories for $95 per share, or $1.1 billion in cash, the companies announced Monday. The deal also includes an option for Furiex shareholders to receive up to $30 a share more, bringing the total value of the deal to $1.5 billion.
The additional payout depends on how eluxadoline, Furiex’s experimental treatment for patients suffering from irritable bowel syndrome with diarrhea, is designated by federal regulators after they complete their review of the drug.
Forest also has entered into a separate agreement with Royalty Pharma to sell Furiex’s royalties on alogliptin, a treatment for Type 2 diabetes, and Priligy, a treatment for premature ejaculation, for about $415 million. Forest’s acquisition of Furiex is not contingent on its agreement with Royalty Pharma.
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Forest itself is in the process of being acquired by Actavis, an Irish specialty pharmaceutical company, for $25 billion. That deal, which was announced in February, is expected to close by the middle of this year.
During its four-year history Furiex, which spun out of Wilmington-based Pharmaceutical Product Development in 2010, has focused on a number of different therapeutic areas. But the company became an attractive acquisition target in February after eluxadoline met initial targets with American and European regulators.
The price Forest is paying for Furiex speaks to how enormous a market opportunity drug makers see in treating irritable bowel syndrome, a condition that effects millions but for which few drugs are now approved.
Raleigh-based Salix Pharmaceuticals, which sells drugs to treat gastrointestinal ailments, estimates that it could earn $2 billion in revenue if its best-selling drug, Xifaxan, is approved by to treat irritable bowel syndrome with diarrhea.
Edward Nash, an analyst with Cowen & Co., forecasts that eluxadoline could have annual sales of $2.2 billion worldwide, including $1.7 billion in the United States, by 2020. He said being acquired by Forest was the best possible outcome for Furiex.
“To get the best bang for the buck it was going to have to be through a really lucrative partnership or the sale of the company,” he said.
Investors seemed to agree. Furiex shares surged 28 percent, or $22.90, on Monday to close at $103.05. Forest shares closed at $89.50, down 34 cents.
Eluxadoline is expected to complement Forest’s drug Linzess, which treats patients who are suffering from irritable bowel syndrome with constipation. Nash noted that the same doctors who prescribe Linzess will also be prescribing eluxadoline once it’s approved.
“They’re basically getting an asset that they’re able to immediately commercialize without any really additional expense,” he said.
Big pay day for Eshelman
Not all analysts liked the deal. Irina Rivkind Koffler with Cantor Fitzgerald assigned no value to the deal, saying that eluxadoline is unlikely to gain Food and Drug Administration approval. Nash said he’s confident the drug will be approved, though regulators may include some special labeling to address certain safety concerns.
Eluxadoline has been granted fast-track status by the FDA, a designation that accelerates the review process for drugs that have the potential to offer significant improvement in treatment compared with products already on the market. The company is on schedule to submit a new drug application with the FDA for eluxadoline by the end of the third quarter.
Furiex executives declined interview requests on Monday.
The deal represents another massive payout for Fred Eshelman, Furiex’s chairman and the founder of PPD, one of the largest contract research organizations in the world. Eshelman, a UNC-Chapel Hill graduate, owns 27.2 percent of Furiex’s outstanding stock, according to a February regulatory filing.
“I am very proud of our team for its hard work and excellent development of eluxadoline in just another four years,” Eshelman said in a statement. “There is a strong business fit between Furiex and Forest, and eluxadoline is expected to contribute to Forest’s leading [gastrointestinal] franchise.”