News of the deal comes just days after Penwest unveiled a set of second quarter financials in which increased royalties from Endo’s sale of Opana ER, which is an opioid painkiller that uses its Timerx extended-release technology.
The deal allows Endo to retain more of the revenue generated by Opana ER, which will not face generic competition until January 2013 after Penwest settled a number of patent disputes that threatened to impact sales.
Endo predicted that control of Penwest will add to its earnings immediately this year and raised its guidance from between $3.25 to $3.30 to the $3.30 to $3.35 range.
In wider terms, COO Julie McHugh said that the acquisition will allow Pennsylvania-based Endo to apply Penwest’s delivery technologies across its portfolio for branded and generic drug products, particularly for its core pain management franchise.
The impact of the takeover, which is expected to complete next month, on Penwest’s deals with other pharmaceutical firms that use its delivery and formulations technologies, or indeed others that may be interested in applying them to new drugs, is unclear.
In a filing with the Securities and Exchange Commission (SEC) on Sunday Penwest president Jennifer Good, who owns a 38.6 per cent stake in the firm, explained the motivation for accepting the takeover offer.
She said, "The Board of Directors and I concluded that this transaction is in the best interests of Penwest and its shareholders and is an excellent way to maximize the value of Penwest's most strategic asset, Opana ER."
Some observers have raised concerns about the takeover, including Kendall Law and Robbins Umeda which are examining whether Penwest agreed the deal “without properly shopping for a deal that would provide better value.”
And, while such investigations are often conducted by law firms that monitor M&A activity, in this case the announcement of the deal just three days after Penwest posted its results may lend weight to the idea the firm did not shop around.
It is also possible of course that talks between Penwest and Endo had been going for as long as the two firms have collaborated on Opana ER. Either way, the deal is clearly an interesting development.
Meanwhile, Endo further underlined its efforts to build in pain management by announcing it has filed a new drug application (NDA) for an extended release formulation of oxymorphone with the US Food and Drug Administration (FDA).
The new formulation, was developed in collaborations with German pain drug specialist Grunenthal, is intended to treat moderate to sever pain in a manner that reduces both accidental and deliberate opioid misuse.