Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why Furiex Pharmaceuticals Inc. Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Furiex Pharmaceuticals (UNKNOWN: FURX.DX  ) , a drug development company that holds a percentage of royalty rights on a handful of FDA-approved therapies, skyrocketed as much as 33% after Forest Laboratories (NYSE: FRX  ) announced it was purchasing the company in a deal worth $1.46 billion.

So what: Under the terms of the deal Furiex shareholders will receive $95 per share in cash and could receive up to $30 per share in contingent value depending on whether or not the company's lead experimental drug, eluxadoline, a treatment for diarrhea-predominant irritable bowel syndrome, is approved by the Food and Drug Administration. According to the press release, once the transaction is completed Forest Labs intends to sell Furiex's royalty rights to type 2 diabetes therapy Nesina and premature ejaculation treatment Priligy to Royalty Pharma for roughly $415 million. The deal is unique in that Actavis (NYSE: AGN  ) is also in the process of acquiring Forest Labs at the moment, but it, too, has given its full support for the buyout.

Now what: I can remember but an instance or two over the years of one company purchasing another while also in the process of getting purchased itself, so this is a bit weird to say the least. I can't say I'm particularly thrilled with the value of this transaction from the perspective of Actavis or Forest Labs. I understand that the company would be able to recoup some of its purchase price by jettisoning Furiex's royalty rights, but it's placing a monstrous valuation on eluxadoline. Even with the company's positive late-stage trial results on eluxadoline I see this huge premium as carrying quite a bit of risk. For Furiex shareholders, however, you should be breaking out the champagne.

Furiex shares may have soared today, but over the long run this stock may easily outpace its gains
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with amazing potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303%! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 08, 2014, at 4:46 PM, user5701 wrote:

    I was a FURX owner (which I received from the PPDI spin-off) and received my $95/share yesterday. I also notice my broker still has a placeholder under my positions labeled as "F019268" which I assume is still there due to the additional contingent payout. From what I can tell, I see a few transactions where FURX was exchanged to F019268 and F012068, I was paid out on F012068, and F019268 remains in my positions listing.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2933065, ~/Articles/ArticleHandler.aspx, 8/28/2015 1:22:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

Today's Market

updated 4 hours ago Sponsored by:
DOW 16,654.77 369.26 2.27%
S&P 500 1,987.66 47.15 2.43%
NASD 4,812.71 115.17 2.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 4:01 PM
AGN $312.00 Up +6.02 +1.97%
Allergen PLC CAPS Rating: ****
FRX $0.00 Down +0.00 +0.00%
Forest Laboratorie… CAPS Rating: ****
FURX.DX $0.00 Down +0.00 +0.00%
Furiex Pharmaceuti… CAPS Rating: **