Irish pharmaceutical giant Mallinckrodt Pharmaceuticals said it will pay $5.6 billion in cash and stock for a fast-growing Anaheim bio-pharmaceutical firm that specializes in treating multiple sclerosis, the companies announced Monday.
The deal for Questcor Pharmaceuticals Inc. would give Mallinckrodt drugs that primarily treat chronic autoimmune and inflammatory disorders. Questcor's Acthar Gel, used in the treatment of multiple sclerosis, accounts for most of the company's sales.
The proposed Questcor acquisition would be the second large purchase Mallinckrodt makes in Southern California this year.
In February, Mallinckrodt agreed to pay about $1.4 billion for Cadence Pharmaceuticals of San Diego. Cadence makes the specialty drug Ofirmev, an injectable version of acetaminophen that has been used to treat as many as 7 million patients since it was introduced in January 2011. Acetaminophen is the active ingredient in Tylenol.
Under terms of the deal, shareholders of Questcor — formed in 1999 in the merger of Southern California companies RiboGene Inc. and Cypros Pharmaceutical Corp. — will be paid $30 in cash and 0.897 of a share of Mallinckrodt stock for each share of Questcor common stock they own.
Based on the closing price of Mallinckrodt and Questcor shares Friday, that amounts to a total value of about $86.10 per share of Questcor, a 27% premium.
If the deal is approved, Mallinckrodt shareholders will own 50.5% of the combined company; former Questcor shareholders will own the remaining stake. The transaction has been approved by the boards of the two companies but is still subject to a vote by shareholders.
The joining of the two firms is expected to be finalized in the third quarter of this year, the companies said.
Acquiring Questcor “will substantially increase the scale, diversification, cash flow and profitability of our business,” said Mark Trudeau, Mallinckrodt's chief executive. “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.”
Acthar Gel was used to help treat about 7,400 patients in 2013, according to Questcor's most recent earnings statement. It had net sales of $761.3 million in 2013, up 49.6% from the year before. It has been approved by the U.S. Food and Drug Administration for 19 conditions.
The combined company would be based in Dublin with Trudeau as chief executive. The board of directors would add three members from Questcor, the companies said.
Questcor's commercial operations would function as a separate business unit within Mallinckrodt's specialty pharmaceuticals segment.
Mallinckrodt employs about 5,500 people and had revenue of $2.2 billion in fiscal 2013.
Questcor shares closed Monday up $12.71, or 19%, at $80.58. Mallinckrodt shares closed down $1.57, or nearly 3%, at $60.95.
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