Print“We believe we are now well on our way to becoming a leader in the development and commercialization of specialty therapeutics around the world, says Trudeau, CEO of Mallinckrodt.”
Global specialty pharmaceutical Mallinckrodt says it will merge with U.S.-based Questcor Pharmaceuticals in a cash and stock deal valued at about $5.6 billion. Questcor’s primary product is H.P. Acthar Gel, an injectable drug used to management difficult-to-treat autoimmune and inflammatory conditions, among them multiple sclerosis relapses in adults and infantile spasms. Questcor’s sales of Acthar, practically its only source of revenue, were $761 million in 2013, up 50 percent from the previous year.
Questcor has been under federal scrutiny for its promotional practices. The company acquired rights to Acthar, a 60-year old drug, in 2001 for $100,000 and is under investigation for continually raising its price, which today costs $28,000 a vial. The company has justified the price by noting that its primarily approval was for a rare disease in infants, but since Questcor acquired the drug, it has won approval for its use in 19 indications.
Under the terms of the transaction, Questcor shareholders will receive $30.00 per share in cash and 0.897 Mallinckrodt shares for each share of Questcor common stock they own. The deal values Questcor at $86.10 a share, a premium of about 27 percent over its closing price before the announcement. Questcor shareholders will own about 49.5 percent of the combined company.
The deal diversifies Mallinckrodt’s portfolio, which will include novel therapeutics for pain management, as well as central nervous system, renal, rheumatologic and other autoimmune and inflammatory disorders. It is also consistent with its strategy to become a top specialty pharmaceutical.
Domiciled in Ireland, Mallinckrodt was spun out of medical device maker Covidien in 2013. Its merger with Questcor comes just two months after the specialty pharma said it would pay $1.3 billion to acquire Cadence Pharmaceuticals, picking up the profitable injectable pain drug Ofirmev and expanding access to the hospital market.
“We believe this transaction will provide a strong and sustainable platform for future revenue and earnings growth, and provide exceptional value for shareholders of both Mallinckrodt and Questcor,” says Mark Trudeau, CEO of Mallinckrodt. “It will substantially increase the scale, diversification, cash flow and profitability of our business, while expanding and enhancing the breadth and depth of our specialty pharmaceutical platform. With Questcor, combined with our recently completed acquisition of Cadence Pharmaceuticals, the new Mallinckrodt will have a significant, established presence with prescribers, payers and hospitals.”
Mallinckrodt expects to see tax synergies from its Irish domicile and expects the transaction to be immediately accretive to its fiscal year 2014 adjusted diluted earnings per share, and significantly accretive to its fiscal year 2015 adjusted diluted earnings per share.
As far as worries about a federal investigation into Questcor’s pricing practices, Trudeau, in a conference call, told investors and analysts that it had conducted a thorough investigation of the risks and was comfortable about Questcor’s business going forward. He said generic competition would not easy because the drug is very difficult to manufacture.
“After significant due diligence, we have concluded that Questcor is another ideal strategic fit with Mallinckrodt,” Trudeau says. “We believe we are now well on our way to becoming a leader in the development and commercialization of specialty therapeutics around the world.”
April 11, 2014
http://www.burrillreport.com/article-mallinckrodt_to_buy_questcor_for_5_6_billion.html
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