Biotech Stock in News: Endo to Buy Auxilium & Diversify Portfolio

Endo International (ENDP) is set to acquire Auxilium Pharmaceuticals, Inc (AUXL) for $2.6 billion ($33.25 per share) in cash as well as stock. The transaction is expected to close by the first half of 2015. The acquisition is expected to be immediately accretive to Endo’s earnings following the closure.

Auxilium Pharma grabbed Endo’s offer, which represented a huge premium of 55% over Auxilium Pharma’s Sep 16 closing price. Auxilium Pharma’s share price shot up over 9% following the announcement.

Endo’s offer of $33.25 per share can be opted for in three ways. Auxilium Pharma stockholders may choose the transaction to be wholly an equity transaction (0.488 Endo shares equal each Auxilium Pharma share) or a cash only transaction ($33.25 for each Auxilium Pharma share) or a mix of both ($16.625 in cash for each Auxilium Pharma share and replace 0.244 Endo shares for each Auxilium Pharma share).

Biotech Stock News

The Auxilium Pharma acquisition will boost Endo’s portfolio with products like Xiaflex (Dupuytren’s contracture and Peyronie’s disease), Testopel (testosterone replacement therapy) and Stendra (erectile dysfunction). Xiaflex is also being developed for other indications. With the addition of Auxilium Pharma’s products, Endo can diversify its business in areas like urology and orthopedics. At present, Endo primarily has men’s health and pain products.

Endo expects annual cost synergies of $175 million following the acquisition which is expected to be realized fully in the first year following the closing of the deal. Cost savings also take into account Auxilium Pharma’s recently announced restructuring plan. Endo further expects the transaction to be meaningfully accretive to its earnings in each year following the closure.

Biotech Financial News

We believe it is a wise decision for Endo to acquire Auxilium Pharma. Endo has been struggling financially due to generic competition affecting its key painkillers Lidoderm and Opana ER. The Auxilium Pharma acquisition will not only help Endo to offset the impact of genericization with new products but will also help to diversify its portfolio.

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