UPDATE 2-Auxilium Pharma eyes tax savings with QLT deal

Thu Jun 26, 2014 12:55pm EDT
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(Adds analyst comment, details; updates stock movement)

June 26 (Reuters) - Auxilium Pharmaceuticals Inc will buy Canadian eye drug maker QLT Inc for $346 million in the latest pharma deal aimed at cutting tax bills.

Healthcare companies have struck billion-dollar deals to move their headquarters to lower-tax countries, and the Auxilium-QLT deal has been structured to base the combined company in low-tax British Columbia, Canada.

"The transaction is expected to allow Auxilium to reduce its long-term effective tax rate from the high 30 percent range to roughly 25 percent, and potentially lower in later years," Aegis Capital analyst Raghuram Selvaraju wrote in a note.

Valeant Pharmaceuticals International Inc, Canada's biggest publicly listed drugmaker, has cited the lower tax rate as a key advantage as it pursues a hostile bid for Botox-maker Allergan Inc.

Auxilium, which currently focuses on men's health, orthopedics and dermatology, said the deal would help diversify into a new treatment area, as well as build up a portfolio of drugs aimed at rare indications.

Such drugs, called orphan treatments, often command premium pricing.

QLT's synthetic retinoid treatment, its lead product, replaces a key chemical component in the eye that helps in visual functioning. The drug is being tested to treat eye diseases caused by gene mutations that hamper the availability of the component.

Auxilium said it plans to continue to look for potential partnership agreement for late-stage studies of the drug.   Continued...