As consolidation activities continues to become more frequent in the biopharmaceutical sector, Horizon Pharma plc (NASDAQ: HZNP) announced this morning that they have made a bid to acquire competitor DepoMed Inc. The equity value of the deal is about $1.8bn.
Depomed shares touched a record high of $28.75, but were still trading below Horizon’s offer price of $29.25. The deal will bring to Horizon Ravicti® (glycerol phenylbutyrate) oral liquid and Buphenyl® (sodium phenylbutyrate) tablets and powder, both indicated for urea cycle disorders. Horizon’s stock fell nearly 2 percent to $33.86.
The proposal represents a 42% premium to Depomed’s closing price on 6 July and if consummated, would be immediately and substantially accretive to Horizon’s adjusted diluted earnings per share. Past year the company moved its legal address to Dublin, Ireland, while keeping its operations in Illinois, which cut its USA tax bill through what’s known as a tax inversion.
Depomed bought the rights to Nucynta from Johnson & Johnson (JNJ.N) for $1.05 billion in January.
The combined company would have 13 marketed medicines, almost doubling Horizon’s current portfolio, with more than 700 sales representatives in Primary Care, Orphan and Specialty business units, and projected full-year pro forma 2015 net sales in excess of $950 million, it says.
Last week, analysts pointed out that Horizon Pharma ($HZNP) had plenty of potential buyouts to choose from, unlike bigger companies looking for bigger deals. Horizon said it is going public with its offer because Depomed executives have refused to engage in talks with Horizon.
Post closing, Depomed shareholders would own approximately 25 per cent of the combined company.
Depomed now has five products on the market treating pain, while Horizon Pharma sells four pain treatments. This pre-condition may be waived by Horizon Pharma plc at its discretion.
The company reported a 118-per cent jump in revenue at $113 million for the first quarter, compared to $52 million for the same quarter a year ago. Morgan Stanley and Leerink Partners are serving as Depomed’s financial advisors.
