British Firm Agrees to Buy M D Pharmaceutical Inc.

A fast-growing British drug company has reached a tentative accord to acquire M D Pharmaceutical Inc., a specialty drug maker, for about $77 million.

If completed, the purchase would mark the entry of Medeva PLC into this country. It also would give the British firm 35% of the U.S. market for a prescription drug that M D makes. Such a big market share helps to explain why the proposed purchase price is five times M D’s $15.5 million in revenue last year.

The privately owned, 17-year-old Santa Ana company is one of just two drug makers approved by the federal government to distribute methylphenidate hydrochloride, a prescription drug for the treatment of hyperactivity in children and narcolepsy in adults.

Sales of that drug accounted for 80% of M D’s revenue last year. The company also makes several generic drugs--antidiarrheals, antihistamines, antidepressants, sedatives and stimulants--and has other products under development.

Medeva Chairman Bernard Taylor said in a statement that M D was attractive because it has products similar to Medeva’s and serves similar customers.

M D also “is well placed in its principal markets . . . and it has a proven and loyal management team in place,” he said.

The proposed acquisition is subject to further negotiation and approval by Medeva shareholders. Also, Medeva intends to pay for the acquisition by issuing new shares of stock, which could be a significant obstacle.

If the deal goes through, it will not change M D’s operations, said Sheldon Scharlin, M D’s controller.

The 17-year-old company, which has nearly 50 employees, is not expected to add more workers, said Scharlin, who added that he expects the sale to be completed within 60 days.

Medeva, formed in January, 1990, from the merger of a drug research firm and a drug maker, has become Britain’s largest manufacturer of generic drugs and its only producer of human vaccines. It has grown by acquiring a small firm and by buying drugs from well-known pharmaceutical companies Wellcome PLC and SmithKline Beecham.

The group had earnings of $7.7 million on revenue of $101.4 million.

Medeva was overwhelmingly dependent on sales to Britain’s National Health Service, selling just 15% of its product overseas.

It set its sights this year on overseas expansion and earlier this month formed a joint venture in Spain to sell human vaccines there.