Forest Laboratories Inc FRX.N said it would buy Furiex Pharmaceuticals Inc FURX.O for up to $1.46 billion, including milestone payments, to add a promising treatment for irritable bowel syndrome to its gastrointestinal drugs portfolio.
Forest will pay about $95 per share in cash to Furiex shareholders and up to $30 per share as contingent value rights.
Furiex's shares rose about 30 percent to $104.56 in morning trade.
The acquisition is the latest of several multi-billion dollar healthcare deals and offers announced over the past week as the industry goes on a shopping spree to either gain scale or pick up expertise in specific disease areas.
Forest, which itself is being acquired by Actavis Plc ACT.N, said it expected Furiex's lead drug, eluxadoline, to be "very complementary" to its own bowel drug Linzess.
Eluxadoline, being developed to treat diarrhea-predominant irritable bowel syndrome, significantly alleviated symptoms of the disease in two large late-stage trials.
Linzess, on the other hand, is already approved to treat irritable bowel syndrome with constipation. Between the two, Forest will be able to cover the two most common subtypes of irritable bowel syndrome.
"(Eluxadoline) really is the flip side of the same coin of Linzess, so we are the perfect owner of this asset," Forest Chief Executive Brent Saunders said on a conference call.
Furiex is on track to submit a marketing application for eluxadoline by the end of the third quarter of 2014.
Forest, which plans to use cash on hand to fund the acquisition, said it would sell Furiex's royalties on diabetes drug alogliptin and premature ejaculation treatment Priligy to New York-based Royalty Pharma for about $415 million upon completion of Furiex acquisition.
"Our partnership with Royalty Pharma will allow us to expand our (gastrointestinal) franchise in a capital-efficient manner, preserving Forest capital to be deployed to areas which are core to Forest," Saunders said.
The divestment is expected to cut its purchase price by about $315 million after tax, Forest said.
The contingent value right of the deal would be dependent on the drug achieving certain designations given by the U.S. Food and Drug Administration following its approval.
Forest said it expected the Furiex deal to close in the second or third quarter of 2014 and said it would not affect the timing of the Forest-Actavis acquisition.
Generic drugmaker Actavis said in February that it would buy Forest for about $25 billion to gain higher-margin, branded treatments for Alzheimer's, hypertension and other disorders.
Furiex was advised by BofA Merrill Lynch, Credit Suisse, Kirkland & Ellis LLP and Wyrick Robbins Yates & Ponton LLP.
Covington & Burling LLP was Forest's legal counsel, while Royalty Pharma was advised by Goodwin Procter LLP.
Forest shares were marginally up at $90.04.
(Editing by Don Sebastian and Sriraj Kalluvila)