Last week, analysts pointed out that Horizon Pharma had plenty of potential buyouts to choose from, unlike bigger companies looking for bigger deals. Now, the $5 billion market-cap company has zeroed in on a target: Depomed, the pain drug specialist.
Thing is, Depomed isn’t one of those companies offering to sell. It’s a hostile bid.
Horizon has offered $29.25 per share, a 42% premium to Monday’s closing price, in an all-stock bid worth $3 billion.
Horizon has been trying to woo Depomed since March, CEO Timothy Walbert said in a statement, but the company has refused to come to the table. Hence the hostile bid; Horizon figures shareholders will be more receptive.
“The strategic and financial benefits of our proposal are highly compelling,” Walbert contends, citing “significant” opportunities to ratchet up revenue of the combined company’s 13 marketed products and to cut overlapping costs. Plus, given Horizon’s 2014 inversion deal, which moved its nominal headquarters to Ireland, the deal comes with tax savings, too.
Depomed isn’t sold on the idea. Responding to Horizon’s hostile bid, Depomed noted that the offer is unchanged from the one its board has twice rejected. Plus, the company argues that its solo prospects are solid, what with its recent purchase of Johnson & Johnson’s Nucynta franchise.
The company’s directors “unanimously believe that the interests of Depomed shareholders would be best served by benefiting from 100% of the upside inherent in Depomed,” the board said in a statement.
Depomed’s case for a standalone future–and Horizon’s case for a buyout–both depend on the company’s pain products, such as the shingles pain treatment Gralise and the migraine drug Cambia. Plus, there’s the Nucynta franchise, a suite of three products that target neuropathic pain, including one in liquid form that hasn’t yet been launched.
Melding that portfolio with Horizon’s own pain meds would deliver $950 million in pro forma sales for 2015, Horizon says. And the combined company could put 700 sales reps on the street to promote those drugs, amping up revenue further.
Plus, new sales in the pain field could help offset payer pushback on Horizon’s arthritis pain meds Duexis and Vimovo. After a major price hike on Vimovo–its sticker went up 597% after Horizon bought the drug rights from AstraZeneca, according to The Wall Street Journal–Express Scripts and CVS Health kicked both meds off their formularies in a move that could take a 30% bite out of prescriptions.
“We would create substantial long-term value for Depomed’s shareholders in addition to the immediate value realized through the proposed premium,” Walbert said.
The Depomed deal would follow Horizon’s March buyout of Hyperion Therapeutics, a $1.1 billion deal that brought two rare disease meds into the fold. Last year, Horizon snapped up Vidara Therapeutics for $660 million, in a deal that flipped its domicile to tax-friendly Ireland. Vidara brought along the rare disease med Actimmune.
By Tracy Staton
