Two Pharmaceutical giants, Salix Pharmaceuticals and Cosmo Pharmaceuticals SpA split up after reportedly terminating their merger agreement due to "changed political environment."
A changed "political environment has created more uncertainty regarding the potential benefits we expected to achieve," according to Salix Pharmaceuticals Chief Execuitve Officer Carolyn Logan.
North Carolina-based Salix Pharmaceuticals stated in July its plan for a merger with Irish subsidiary of Cosmo Pharmaceuticals SpA to relocate the company's headquarters in Ireland, where taxes are less costly in a move called tax inversion.
The top 20 Salix shareholders initially did not vote for the merger with Cosmo Pharmaceuticals. Instead, they chose another route: a company takeover by Botox producer Allergan Inc.
Now, Salix has left the Allergan because Allergan's shareholders which include its third-largest shareholder, T.Rowe Price Group Inc. did not reportedly support the acquisition of Salix.
The goal of the Salix-Cosmo deal was originally to escape the United States' 35 percent corporate tax rate, the highest across the globe.
However, Salix will not be able to materialize its goal because of the terminated Cosmo deal along with the Obama administration strengthening its efforts in Aug. to prevent corporate tax inversion.
If Salix and Cosmo deal would have continued, Salix would have been able to be a subsidiary of the Irish unit of Cosmo, Cosmo Technologies Ltd and acquired patents worth $2.7 billion to three gastrointestinal drugs from Cosmo Pharmaceuticals.
When asked about the termination of the deal, Cosmo stated that it will not affect the market value of both companies.
"The deal with Salix showed the potential of three products of ours for US. The development path of the pipeline continued in the meantime, so this termination has no effect on value creation," said Cosmo CEO Alessandro Della Cha.
Salix Pharmaceuticals' top selling drug, Xifaxan, used to treat travelers' diarrhea, closed in at $9.6 billion at the regular trading yesterday.
