ViroPharma to buy Lev for up to $617.5 million

ViroPharma Inc. said Tuesday that it will buy Lev Pharmaceuticals Inc., a biopharmaceutical company that focuses on developing treatments for inflammatory diseases, for up to $617.5 million in cash and stock.

Exton, Pa.-based ViroPharma will pay $442.9 million upfront, or $2.75 per Lev share. The company may pay an additional $174.6 million, or $1 per share, if Lev's drug candidate Cinryze meets certain milestones.

Shares of ViroPharma fell $1.71, or 13.6 percent, to $10.83 in heavy trading. Lev stock trades over the counter.

More than 3.7 million shares changed hands by 11:30 a.m. Eastern. The average trading volume for ViroPharma shares was about 1.1 million over the last 100 days.

In a conference call, ViroPharma Chief Executive Vincent Milano said peak sales of Cinryze could reach at least $250 million to $300 million per year if the drug is approved both as a preventive treatment and a treatment for acute cases.

The Food and Drug Administration is reviewing Cinryze as a preventive treatment for HAE, and a panel has recommended the drug be approved. ViroPharma said about 10,000 people have the disease in the U.S., but only 4,600 have been diagnosed.

A separate review, and possibly additional clinical trials, will be needed for the drug to reach the market in the acute setting.

HAE causes severe swelling, and it can be fatal if it causes swelling in the larynx, blocking the airways. Patients who suffer acute attacks may be treated with breathing tubes and tracheostomy, a procedure in which surgeons cut into the windpipe to allow a patient to breathe.

The illness is most often treated with anabolic steroids in the U.S., but ViroPharma said patients and allergists would prefer a new option.

Cinryze has received orphan drug status in both indications, which could prevent similar drugs from being sold for up to seven years. Orphan drug status is granted for drugs that treat illnesses that affect fewer than 200,000 people in the U.S.

ViroPharma's only marketed drug is Vancocin, which treats gastrointestinal tract infections.

ViroPharma also agreed to buy $20 million in Lev stock. The boards of both companies have approved the deal. In the buyout, ViroPharma is paying $2.25 per share in cash, and 50 cents per share in its own stock.

Lev will be paid another 50 cents per share if Cinryze receives FDA approval to treat acute HAE and receives orphan status, or if the drug is approved as a preventative treatment and no other products are approved for acute HAE. ViroPharma will pay an additional 50 cents per share if the drug reaches $600 million in total sales within a decade.

Several other companies, including Dyax Corp. and Shire Ltd., are developing drugs to treat HAE.