Corporate Inversion

There have been a great number of buyouts in the biopharmaceuticals space. While some mergers create synergism, leading to cost savings for the company, as well as, delivering better and more affordable medicines to patients worldwide. Nevertheless, it appears some United States' (US) companies are trying to acquire shell corporations oversea to avoid tax.

In a letter released on September 22, 2014, Secretary Treasury Jacob Lew is pushing for tougher legislation to prevent companies from exercising corporate inversion to avoid US tax. "Comprehensive business tax reform that includes specific anti-inversion provisions is the best way to address these transactions," said Lew. Many companies, especially biopharmaceuticals, complemplating on such mergers, could be deterred from closing such imprudent practices.

Potential Mergers of Auxilium, QLT and Endo International PLC

Specialty Pharma, Auxilium Biopharmaceuticals, Inc (NASDAQ: AUXL) recently received an offer from Ireland-based Endo International PLC for $2.2 billion or $28.10 per share –to be paid in both cash and stocks. Nonetheless, on June 26, Auxillium sent an offer to acquire the Canadian biotechnology firm, QLT Inc. (TST: QLT).

Auxilium Denied Endo's Buyout Offer

Just yesterday, Auxillium issued a press release, stating that the Endo offer "Is not a superior proposal under the terms of its existing merger agreement with QLT and has unanimously reaffirmed its recommendation that Auxilium's stockholders vote in favor of the adoption of such merger agreement. In addition, the Board has determined that Endo's proposal significantly undervalues Auxilium. However, under the terms of the merger agreement with QLT, Auxilium maintains the right to engage in discussions with Endo and other third parties, subject to certain conditions in the merger agreement."

QLT Inc. has recently sold nearly all of its assets and only retains a synthetic retinoid (man-made Vitamin A), which is currently testing in Phase 1b for Leber Congenital Amaurosis (LCA) and Retinitis Pigmentosa.  Both of these conditions are quite rare and not to mention the clinical study is not even in Phase 2.

According to QLT, " Current shareholders of Auxilium will receive 3.1359 QLT shares for each Auxilium share, subject to certain adjustments. For QLT shareholders, the transaction represents a 25% premium based on a calculation of the closing NASDAQ stock prices of Auxilium and QLT on June 25, 2014, the last trading day prior to the announcement of the merger. When completed, Auxilium shareholders will own approximately 76% of the combined entity on a fully diluted basis, and current QLT shareholders will own approximately 24%, subject to certain adjustments."

Read more at Retail Investor 360.