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M&A news: who will win the bidding race?

Posted on 16 February 2015

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M&A news: The Canadian pharma company Valeant Pharmaceuticals is rumoured to be raising money to make a bid for specialty drugmaker Salix Pharmaceuticals, according to Bloomberg, which cites people familiar with the matter.

If that is true it could put Valeant in competition with Shire, which according to a Reuters report has also been linked to a possible bid for Salix, a fast-growing specialist in gastroenterology therapies. All three companies are staying tight-lipped about the rumours.

Salix has a market capitalisation of more than $9bn and Valeant is said to be considering a bid of at least $150 per share, which would value the company at around $9.6bn. Salix achieved sales of $1.1bn in the first nine months of 2014, two third higher than the same period a year earlier.

The takeover interest comes at a troubled time for Salix and any bids could be viewed as somewhat opportunistic, despite Salix' strong underlying business.

The firm's chief executive - Carolyn Logan - stepped down last month after over-supply issues for a number of products that required a correction in wholesaler inventories and resulted in a cut in 2014 revenue and earnings forecasts.

The problems affected Salix' hepatic encephalopathy therapy Xifaxan (rifaximin) as well as other products such as diabetes therapy Glumetza (extended-release metformin). While the company insisted in its third-quarter results briefing in November the matter was being resolved and that its accounting practices were 'appropriate', observers have suggested fines or litigation may result.

Added to that, Salix tried and failed to push through a tax inversion-driven merger with Italy's Cosmo Pharmaceuticals after the US started to clamp down on acquisitions designed to prevent companies from getting access to offshore funds without paying US tax on them.

Nevertheless, in the latter half of last year Salix introduced three new products - Ruconest for hereditary angioedema, Relistor (methylnaltrexone bromide) subcutaneous injection for chronic non-cancer pain and Uceris (budesonide) rectal foam for ulcerative colitis - that Logan said would help drive growth.

Path clears for Provenge deal

Meanwhile, Valeant has just reported that no other bids for Dendreon's business have been received by the offer deadline, so it remains the only company in the running to acquire Provenge (sipuleucel-T) and expects to close the deal by the end of the month.

Dendreon has struggled with low sales of its Provenge (sipuleucel-T) prostate cancer vaccine since it was launched in 2010 - thanks to a hefty price tag and competition from cheaper conventional drugs such as Johnson & Johnson's Zytiga (abiraterone) and Astellas/Medivation's Xtandi(enzalutamide) - but Valeant believes it can revitalise the product.

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