Biotech Values

[DewDiligence]

Market Likes Alpharma’s Rejection of KG’s Offer

[An unusual wrinkle in KG’s offer for ALO is that ALO’s Embeda (#msg-27217152, #msg-28675788) is similar to PTIE’s Remoxy, which KG already owns the rights to.]

http://blogs.wsj.com/health/2008/08/22/market-likes-alpharmas-rejection-of-kings-rich-offer

›August 22, 2008, 1:36 pm
by Jacob Goldstein

More pharma M&A action today, with King Pharmaceuticals announcing that Alpharma rejected a $1.4 billion cash buyout offer King made earlier this month. Alpharma’s decision to walk away from the offer — and the market’s reaction to today’s news — is yet another sign of the strong position held by small drug companies with products on the market.

The bid repesented a 49% premium to where Alpharma’s shares were trading when King made the offer, and a 37% premium to where the stock closed yesterday. But Alpharma went through the roof today when the bid was announced, and early this afternoon it was trading above King’s $33-per-share offer price. [ALO closed at 34.51, +44%.]

Like many larger pharma companies, King has been struggling with patent problems. Last year, the company lost a patent lawsuit over its best-selling blood-pressure drug Altace. Earlier this month, the company said its second-quarter net income tumbled 34%, as Altace faced generic competition, the WSJ notes.

And, like many larger companies, King is looking to buy its way out of trouble. Alpharma recently launched a prescription patch for pain that brought in $37.7 million in its first quarter on the market, and hopes to launch another pain drug early next year.
Ken Trbovich, an analyst with RBC Capital Markets, told Bloomberg that other bidders — such as Endo, Cephalon or Johnson & Johnson, all of which already sell pain medicines — could swoop in to bid for Alpharma. “This puts them on the map with a ‘for sale’ sign in their yard, whether they wanted this or not,” he said.‹