Hectic week of M&A led by the return of King to Alpharma

By Gareth Macdonald

- Last updated on GMT

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King Pharmaceuticals’ $1.6bn (€1.2bn) acquisition of Alpharma heads a busy week of deals that has seen J&J agree to pay $438m for Omrix and India’s Sun further its presence in the US narcotic APIs sector through the purchase of Chattem Chemicals.

In September, Alpharma rejected King’s takeover advances for a third time, describing the Tennessee-based drugmaker’s $1.55bn offer, which was up from the $1.4bn originally tabled, as “financially inadequate” ​and advising shareholders to wait while it considered its options.

Acceptance of the improved offer suggests that Alpharma’s board is satisfied that the deal now represents top dollar, particularly as it follows the recent positive news from a US Food and Drug Administration (FDA) review panel about its anti-abuse opioid candidate Embeda.

From King’s perspective the acquisition strengthens its position in the abuse-deterrent opioid market, which was dealt a bit of a blow when the same FDA panel that reviewed Alpharma’s Embeda offered a more mixed verdict on its oxycodone-based candidate Remoxy.

As Corey Davis, an analyst at Natixis Bleichroeder, told Reuters​, the deal "is a no-brainer for King, as it not only provides increased revenue diversification with the animal health cash-cow, but more importantly positions King to be the leading company in the promising abuse-deterrent opioid market​."

King expects that the purchase, which must still be approved by Alpharma’s shareholders, will be completed before the end of the year.

Omrix deal boosts J&J’s surgical operations

Johnson & Johnson’s (J&J) acquisition of Omrix Biopharmaceuticals, which is being carried out through the healthcare major’s Ethicon subsidiary, extends its position in the biologics-based hemostatics and surgical products sector.

The $438m deal builds on the firms’ existing relationship that has seen Ethicon sell Omrix’ Evithrom and Evicel products for the past five years. The companies are also collaborating on the development of a fibrin pad for the surgical market, which is in Phase II development.

J&J said that the purchase of the Israeli firm, which is expected to be completed before the end of the year, will result in a one-time charge of $120m related to the write-off of in-process R&D projects.

In an investor note, Leerink Swann analyst Rick Wise said that the Omrix deal “could signal a more aggressive J&J on the acquisition front, particularly as valuations continue to contract in this market environment​."

Sun set on Chattem deal

Sun’s US subsidiary has snapped up Tennessee-headquartered active pharmaceutical ingredient (API) maker Chattem Chemicals for an undisclosed sum. Chattem specialises in the production of ingredients covered by the Drug Enforcement Administration’s (DEA) schedule 1 to 5 ratings.

Perhaps more importantly for Sun however, given its controlled substance making facilities in Hungary and New Jersey, Chattem is also licensed to import narcotic raw materials including methamphetamine, phenylacetone, raw opium and concentrated poppy straw into the US.

This idea is leant support by comments from Sun’s managing director Dilip Shanghvi who said that the Chattem deal reflects the firm’s strategic resolve “to be a more active player in the pain management segment in the US​.”

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