Pharmaceutical firm eyes €2bn Irish purchase alongside a lower tax bill

Salix Pharmaceuticals has agreed to buy the patents to some drugs for gastrointestinal diseases from Cosmo Pharmaceuticals for about $2.7bn (€1.98bn) in stock in a deal that will allow the US company to move to Ireland and lower its tax bill.

Salix, of Raleigh, North Carolina, will merge with an Irish unit of Italy-based Cosmo, the companies said yesterday.

Salix shareholders will own just less than 80% of the combined company, which will be renamed Salix Pharmaceuticals plc, and Cosmo will own the rest.

The transaction adds to the wave of US companies gaining an overseas address as a way to lower their tax rates. AbbVie is bidding for Shire to execute a similar tax inversion. Pfizer bid $117bn in a tax-inversion push for London-based AstraZeneca, a deal that collapsed in a price dispute. Medtronic, a medical-device maker based in Minneapolis, recently announced its intention to buy Covidien and take the legal residence of the Dublin-based company.

With the deal, Cosmo is reversing its decision to try to market some products on its own in the US.

“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 Carolyn Logan said.

For the combined company to be based in Ireland, the deal is structured as if Cosmo’s Irish subsidiary, Cosmo Technologies, is buying Salix.

Salix will gain Cosmo’s US 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 will also have the right to first negotiation with Cosmo over any gastrointestinal drugs the Italian company seeks to market in the US.

Cosmo will own about 19.4m shares of Salix after the deal closes.