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Latest inversion brings Salix to Ireland

Wednesday, July 09 14:35:26

US-based Salix Pharmaceuticals has become the latest multinational pharma to use tax inversion to re-domicile in lower tax Ireland.

It has agreed to buy the patents to some drugs for gastrointestinal diseases from Cosmo Pharmaceuticals SpA for about $2.7 billion in stock in a deal that will allow the U.S. company to move to Ireland and lower its tax bill.

Salix, of Raleigh, North Carolina, will merge with an Irish unit of Lainate, Italy-based Cosmo, the companies said yesterday in a statement. Salix shareholders will own just less than 80 percent of the combined company, which will be renamed Salix Pharmaceuticals Plc, and Cosmo will own the rest, according to Bloomberg News today.

The transaction adds to the wave of U.S. companies gaining an overseas address as a way to lower their tax rates. AbbVie Inc. is bidding for Shire Plc for to execute a similar tax inversion. With the deal, Cosmo is reversing its decision to try to market some products on its own in the U.S.

"The new corporate structure greatly enhances our ability to compete for licensing deals and acquisitions, and improves the economics of future business development opportunities," Salix Chief Executive Officer Carolyn Logan said in the statement to Bloomberg.

For the combined company to be based in Ireland, the deal is structured as if Cosmo's Irish subsidiary, Cosmo Technologies Ltd., is buying Salix. Stockholders in Salix will receive one share of the combined company for each Salix share.

Salix will gain Cosmo's U.S. patents for Uceris, a treatment for ulcerative colitis, the experimental antibiotic rifamycin MMX and methylene blue MMX, an experimental dye for detecting pre-cancerous lesions in the colon. Salix also will have the right to first negotiation with Cosmo over any gastrointestinal drugs that the Italian company seeks to market in the U.S.

Cosmo will own about 19.4 million shares of Salix after the deal closes, Cosmo Chief Financial Officer Chris Tanner said in a telephone interview today. Based on yesterday's closing share price for Salix, that stake is valued at $2.7 billion.

Cosmo, which is traded on the Swiss stock exchange, was founded by its chairman, Mauro Ajani. He owns about 48 percent of the shares. Another 9.9 percent is owned by Dievini Hopp BioTech Holding GmbH, a health-care investment firm co-founded by Dietmar Hopp, one of the founders of SAP AG.