Bausch (BHC) Bids For Assets Of Synergy Pharmaceuticals
Zacks Investment Research | Dec 12, 2018 09:02PM ET
Bausch Health Companies Inc. (NYSE:BHC) announced that it has entered into a definitive agreement to acquire certain assets of biopharmaceutical Synergy Pharmaceuticals Inc. (NASDAQ:SGYP) for approximately $200 million.
Earlier, Synergy Pharma had filed a voluntary petition for reorganization under Chapter 11 of the U.S. Code with the U.S. Bankruptcy Court for the Southern (NYSE:SO) District of New York .
Financial Terms of the Acquisition
Pursuant to Section 363 of the Bankruptcy Code, Synergy will conduct a court-supervised auction and sale process where Bausch will serve as the "stalking horse bidder.”
Per the terms, Bausch (through its affiliate) has agreed to acquire most of Synergy's assets — intellectual property, customer and vendor contracts, accounts receivable and goodwill, among others. Bausch has also agreed to employ most of the current employees of Synergy Pharma.
However, Bausch’s bid is subject to higher or better offers, as other interested parties will have an opportunity to submit competing bids. Assuming the bid is successful, the transaction is expected to close in the first quarter of 2019.
Strategic Value of the Buyout
Bausch expects the buyout to be a strategic fit to its gastrointestinal business. Synergy Pharma is focused on the development and commercialization of novel gastrointestinal (GI) therapies. The company’s lead drug, Trulance is a once-daily tablet approved for adults with chronic idiopathic constipation (CIC) and irritable bowel syndrome with constipation (IBS-C).
Bausch expects Trulance to complement its leading GI drug, Xifaxan, which is indicated for the treatment of irritable bowel syndrome with diarrhea (IBS-D) in adults and reduction in risk of overt hepatic encephalopathy (HE) recurrence in adults.
Moreover, the acquisition will add a promising candidate to Bausch’s pipeline, dolcanatide, which is being evaluated for various GI indications.
Our Take
We do not view the acquisition as an outright positive one. While the prospects of Trulance look good, the drug faces stiff competition from the likes of Allergan’s (NYSE:AGN) Linzess, among others, and hence might not reap the results expected by Bausch.
Sales of the drug have not been impressive. Moreover, Bausch still owes a lot of debt. The company was once an acquisition giant but some of them turned out to be unfavorable. Bausch’s stock has gained 16.1% in the year so far, against the Zacks Investment Research
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