Dealmakers: Rodney Bell and Danielle Price

The Deal: The Holland & Knight partners advised Sunovion Pharmaceuticals Inc. on its acquisition of Elevation Pharmaceuticals and the company’s lead drug, EP-101, an inhalation product for treating chronic obstructive pulmonary disease.

Elevation, renamed Sunovion Respiratory Development Inc., merged into a wholly owned subsidiary of Sunovion.

The deal, valued at $430 million, closed on Sept. 4.

Details: Hopes and expectations had to be translated into cash and milestone payments to make the deal work.

Research and development of COPD treatments is hot right now, and Elevation had EP-101 in Phase 2b clinical trials, with Phase 3 final testing scheduled for the second half of 2013.

The drug is an inhalation solution of a long-acting muscarinic antagonist (LAMA) bronchodilator, aimed at patients who prefer nebulizers or have not responded well to handheld inhalers. EP-101 has a novel delivery system that reduces the time it takes to administer the drug and is smaller and quieter than most other nebulizer devices, according to Sunovion.

Because of the drug’s potential and its front-runner competitive status, Elevation was able to attract a group of private equity backers who invested a reported $30 million earlier this year.

EP-101 has not yet been approved by the Food and Drug Administration. If all goes well, the drug should hit the market by 2016, according to a statement from Hiroshi Nomura, vice chairman of Sunovion and chairman and CEO of its new respiratory development division, formerly Elevation.

Sunovion, based in Marlborough, Massachusetts, is a subsidiary of Dianippon Sumitomo Pharma Co. of Japan. It’s also a longtime client of Holland & Knight.

Bell and Price have handled acquisitions for pharmacy companies before. In 2005, Bell, who heads the firm’s securities and public companies practice in South Florida, assisted Kos Pharmaceuticals of New Jersey in its $104 million purchase from Biovail Corp. of three cardiovascular drugs and three products in development.

The Elevation deal was about six months in the making, Bell said, adding that he and Price did not divide responsibilities. “We tag-teamed it all the way through.”

The company had other potential buyers and an auction, which complicated things.

“The stakeholders in Elevation were various private equity firms and it was an exit strategy for them, so I thought with that in the back of their minds, the negotiations were more interesting,” Price said.

The biggest hurdle was that EP-101 is still in development and therefore has yet to satisfy FDA’s twin standards of safety and efficacy.

“Whenever you invest in a product or therapy that’s in an early stage, you’re taking a risk that ultimately you hope turns into an FDA-approved product,” Bell said. Sunovion, which has “a fairly substantial respiratory practice and experience,” obviously believes the risk is worth taking.

In the end, the transaction looked like this: Sunovion put down $100 million, and promised $90 million in payments for reaching certain research milestones or objectives, up to $210 million for commercial milestones, and another $30 million for additional advances on new products. Speaking generally, Bell said transactions for drug companies are different from other companies in several key ways.

“You have the regulatory overlay, getting FDA approval, you have intellectual property issues, you’ve got patent positions,” he said. “You have to make sure you have market exclusivity, if you do get FDA approval, so you have your own patent positions. You want to make sure that other people’s patents aren’t going to block you from having your product on the market.”

Sometimes playing defense to avoid a deal best serves the client. Last year Bell and Price helped advise PharMerica Corp. when the larger Omnicare launched a takeover bid. The sale would have combined the nation’s two biggest institutional pharmacy companies, both based in Kentucky.

PharMerica’s board rejected Omnicare’s offer of about $716 million, or $441 million plus $275 million in assumed debt. Omnicare said it would take the offer directly to shareholders.

Then the Federal Trade Commission sued to block the proposed transaction, citing anti-competitive concerns.

Omnicare dropped its pursuit of PharMerica in February.

Background: For Sunovion, Bell and Price worked with partners Robert Friedman and Carlos Mastrapa, also from Holland’s Miami office, and colleagues in Tampa, California and Boston who addressed various employment and health care regulatory issues.

The lead law firm for the privately held seller was Latham & Watkins of San Diego. Barclays was financial adviser to Sunovion; Jefferies and Co. was financial adviser to Elevation.