BioWorld International Correspondent

Broadening its footprint in its key market of pulmonary arterial hypertension (PAH), while reducing its dependence on its Tracleer (bosentan) franchise, Actelion Ltd. entered a definitive agreement to acquire CoTherix Inc. for $13.50 per share, or about $420 million.

The price represents a 21 percent premium to CoTherix's closing share price on Friday and a 69 percent premium over its weighted average share price for the last three months.

"I would say it's smack in the middle of what we think would be fair value for the story," said analyst Navdeep Jaikaria at Rodman & Renshaw LLC in New York.

Shares in Brisbane, Calif.-based CoTherix (NASDAQ:CTRX) jumped 19.8 percent to $13.42 Monday, up $2.22. Actelion's stock also rose, gaining CHF13 (US$10.45) to close at CHF215 on the Swiss Stock Exchange in Zurich.

Allschwil, Switzerland-based Actelion plans to commence a cash tender offer for CoTherix's stock Dec. 8, and it hopes to finalize the transaction during the first quarter of 2007, subject to regulatory and other closing conditions. Already, shareholders with 32 percent of CoTherix's equity, including its management, its board and certain other investors, have pledged support for the deal.

It would give Actelion a second marketed product in PAH - Ventavis (iloprost), an inhaled, synthetic prostacyclin analogue that gained FDA approval Dec. 29, 2004. CoTherix in-licensed U.S. rights to the compound from Berlin-based Schering AG in October 2003, and launched it in March 2005. Actelion's PAH drug, Tracleer, a first-in-class oral endothelin receptor antagonist, racked up sales of CHF651.9 million during the first nine months of 2006.

"I think it's a very good fit. The drugs are used in combination in pulmonary arterial hypertension, so it makes sense to combine the companies," said Mark Monane, analyst at Needham & Co. in New York.

The two firms had cooperated on CoTherix's STEP trial, which assessed the efficacy of Ventavis in combination with Tracleer. Based on the study, the FDA allowed CoTherix to modify the drug's label to cover the safe use of the combination.

About 40 percent of patients come off Tracleer within two years, Jaikaria said, either because of liver toxicity problems or poor drug response. Ventavis, which has a different mechanism of action, would offer an alternative option for that group. "It gives them a good one-two punch in the marketplace," he said. "It's a very good way to manage the life cycle of a drug."

Actelion CEO Jean Paul Clozel said on a conference call that he anticipates U.S. sales of Ventavis to exceed $100 million in 2007. "You have to realize CoTherix is really a great company. They have done a fantastic job of putting this drug through the FDA process in record time," he said.

CoTherix, which previously was called Exhale Therapeutics Inc., was founded in 2000 and had been "just doing fine, thank-you," Monane said. However, the link with Actelion would enable it "to leverage the strong work" the Swiss firm has done in the PAH field.

"The stock has not really outperformed [the market] simply because of competitive concerns over inhaled remodulin," Jaikaria said. That compound, which is being developed as a follow-on to a version available via intravenous infusion, by United Therapeutics Corp., of Silver Spring, Md., still is about two years from the market, he said, so first-mover advantage remains with Ventavis.

Tracleer also faces competitive threats, particularly from the Phase III compound ambrisentan, which Foster City, Calif.-based Gilead Sciences Inc. acquired through its recently completed $2.5 billion buyout of Denver-based Myogen Inc.

Although it is becoming increasingly crowded, the PAH market remains significantly underpenetrated, Jaikaria said, with no more than 16,000 patients of the U.S. patient population of 90,000 in receipt of treatment at present.

The two companies should therefore be able to maintain their market share "for at least a few years," he said.