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Salix Pharma Acquires Santarus

Zacks Equity Research

Salix Pharmaceuticals, Ltd. (SLXP) recently announced that it has completed its cquisition of erstwhile Santarus, Inc.

The acquisition was completed following the completion of the tender offer of common stock, par value $0.0001 per share of Santarus, at a purchase price of $32.00 per share.

We note that the acquisition was announced in Nov 2013 concurrent with the third quarter results. The deal was valued at approximately $2.6 million.

The acquisition will broaden Salix’s product portfolio and pipeline besides bolstering its position in the gastrointestinal (:GI) market. With the addition of marketed products like Uceris, Glumetza and Zegerid to its portfolio, Salix’s product offering and revenue base will be diversified. Following the completion of the acquisition, Salix’s product portfolio comprises 22 marketed products namely Xifaxan, Uceris, Glumetza, Zegerid, Apriso, Moviprep, Relistor, Solesta, Deflux, among others.

In addition, Salix and Santarus entered into an agreement with the latter’s licensor Cosmo Technologies Ltd. The agreement relates to the restructuring of certain aspects of Santarus’ partnership with Cosmo.

The Santarus acquisition is expected to be significantly accretive in 2014. Additional synergies will lead to higher earnings accretion in 2015.

We are positive on the Santarus acquisition. The acquisition will also add a 100-member GI-focused sales force to Salix's sales team. The new GI sales force will further strengthen Salix’s existing GI sales force of 200 members. The new sales force will target endocrinologists, infectious disease, pain specialists and high volume primary care physician prescribers, which were formerly not accessed by Salix’s GI-focused sales effort.

Salix currently carries a Zacks Rank #2 (Buy). Companies that look attractive at current include Jazz Pharmaceuticals (JAZZ), Lannett Company, Inc. (LCI) and Forest Laboratories (FRX). All three carry a Zacks Rank #2 (Buy).

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