(Reuters) -Italy's Alfasigma S.p.A agreed on Tuesday to buy drugmaker Intercept Pharmaceuticals for $794 million as it aims to expand its treatment portfolio in liver diseases and digestive system disorders, and bolster presence in the U.S.
The proposed all-cash acquisition would add Intercept's Ocaliva, a treatment for liver disease primary biliary cholangitis, to Alfasigma's portfolio.
Morristown, New Jersey-based Intercept forecasts sales of $320 million to $340 million from the drug this year.
Alfasigma's acquisition of Intercept and its drug Ocaliva makes "best economic cost sense" given that a larger company can market and commercialize the drug with better margins and scale than a smaller biotech, Jefferies analyst Michael Yee said.
The deal comes after Intercept dropped out of the race to develop the first treatment for patients with non-alcoholic steatohepatitis (NASH), a liver disease that affects 5% of U.S. adults, after the U.S. health regulator declined to approve its drug in June.
Following this, Intercept discontinued all NASH-related investments, reduced about one-third of its workforce and restructured its operations to strengthen focus on rare and serious liver diseases.
Alfasigma will pay $19 per Intercept share, which represents a premium of 82% to its last closing price. Intercept's stock surged 77.54% to $18.53 in morning trading on Tuesday, but has fallen 15.6% this year alone. Its shares are down significantly from their peak of roughly $445 in 2014.
The deal is expected to close by the end of the year.
Alfasigma is among Italy's biggest pharmaceutical groups, with its portfolio ranging from prescription drugs to nutraceuticals. Its over-the-counter products include Biochetase, Neo-Borocillin, Dicloreum and Yovis.