Why Did Forest Laboratories Buy Furiex Pharmaceuticals?

Forest Laboratories  (NYSE: FRX  ) has decided to get in on the recent M&A spree in health care with a $1.1 billion acquisition of Furiex Pharmaceuticals (UNKNOWN: FURX.DX  ) . That doesn't cover the total potential consideration, as Furiex shareholders could receive up to an additional $30 per share (or roughly $360 million) depending on the development of eluxadoline, a treatment for a form of irritable bowel syndrome (IBS-D), which Furiex anticipates submitting to the FDA for approval in the third quarter of 2014.

Forest Labs intends to defray some of the deal's costs by selling Furiex's royalty rights to drugs Nesina and Priligy for $415 million, although reportedly the company will retain royalty rights to Oseni and Kazano, both DPP-4 inhibitors for type 2 diabetes.

What makes this an even more interesting acquisition is that Actavis (NYSE: ACT  ) agreed to acquire Forest for $25 billion earlier this year, so it's an acquisition within an acquisition. Check out the video below for more thoughts and commentary on the acquisition, and particularly for the answer to the most critical question: Does this purchase even make sense?

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