Salix Pharmaceuticals and Cosmo Technologies call off merger

Will make a US$25m payment to Cosmo for terminating the deal

Salix Pharmaceuticals has terminated a deal to merge with Cosmo Technologies of Italy, citing a 'changed political environment'.

Under the terms of the deal announced in July, Salix, headquartered in Raleigh, North Carolina, US, would have merged with Cosmo's Irish subsidiary, changed its name to Salix Pharmaceuticals plc, and shifted its tax base from the US to Europe.

The decision to scrap the deal comes shortly after the US Treasury Department took steps to curb 'inversion' deals that let companies avoid US taxes by reincorporating abroad.

Salix manufactures pharmaceutical products and medical devices for gastrointestinal disorders.

The changed political environment has created more uncertainty regarding the potential benefits we expected to achieve

Carolyn Logan, President and CEO of Salix, said: 'When we announced our agreement to merge with Cosmo Technologies in July we believed the combination would generate significant value for our stockholders through the addition of key products to our development pipeline and a more efficient corporate structure that would enhance our profitability.

'Since then, however, the changed political environment has created more uncertainty regarding the potential benefits we expected to achieve. As a result, Salix and Cosmo have mutually agreed to terminate the proposed transaction.'

Salix will make a US$25m payment to Cosmo following the termination.

Cosmo Pharmaceuticals, headquartered in Lainate, Italy, has a pipeline of treatments for inflammatory bowel diseases, colon infections and colon diagnosis, as well as selected topically treated skin disorders. At the core of the pipeline is its proprietary MMX technology.

Alessandro Della Cha, CEO of Cosmo, said: 'The deal with Salix showed the potential of three products of ours for the US. The development path of the pipeline continued in the meantime, so this termination has no effect on value creation.

'Our focus is now on obtaining approval of SIC-8000 and filing Rifamycin SV and Methylene Blue NDA in the next few months. While all strategic options are in our hands, we look forward to a continuation of our long-standing relationship with Salix.'

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