Horizon Pharma withdrew its offer to acquire Depomed after a California state court sided with Depomed in its legal battle against the unsolicited bid.
As of yesterday, when the withdrawal was announced, the value of Horizon Pharma’s all-stock offer was about $1.1 billion—one-third of its value when made public in July by the would-be buyer, reflecting in part the market souring on biopharma.
Depomed immediately began fighting the hostile takeover, starting with a “poison pill” shareholder-rights measure adopted by its board. The board contended that Horizon Pharma’s offer was not in Depomed’s best interests, since it expected to fare better after agreeing in January to buy U.S. license rights and related royalty obligations for the Nucynta (tapentadol) opioid pain drug franchise from Johnson & Johnson’s Janssen Pharmaceuticals for $1.05 billion.
During the first nine months of this year, Depomed recorded $121.597 million in net product sales from the Nucynta product franchise.
That sum exceeds the $109.095 million in sales generated by Depomed’s other four drugs combined—Cambia (diclofenac potassium for oral solution) for migraine attacks; postherpetic neuralgia treatment Gralise (gabapentin) tablets; Lazanda (fentanyl nasal spray) for breakthrough pain in adults with cancer (18 years of age and older) who routinely take other opioids round-the-clock for cancer pain; and mild-to-moderate acute pain drug Zipsor (diclofenac potassium).
Sales of the other four drugs ranged from $12.475 million for Lazanda, to $59.317 million for Gralise.
“The Nucynta franchise is, in our view, a transformational value driver for Depomed that will significantly increase Depomed's EBITDA and cash flow in 2015 and beyond,” Depomed said yesterday in a statement. EBITDA is earnings before interest taxes, depreciation, and amortization.
“Ultimately, we strongly believe we have successfully executed our acquisition and commercialization strategy, and Depomed has a bright future as an independent company,” the company added.
Both Depomed and Horizon Pharma sought to acquire U.S. rights to Nucynta—and as Depomed argued in California’s Superior Court, both companies agreed not to use information obtained during the bidding for other purposes by signing confidentiality agreements to that effect.
After Horizon Pharma went public with its offer, the company was sued by Depomed, which accused Horizon of basing its takeover offer on information subject to the confidentiality agreement.
Yesterday, Judge Peter Kirwan of Superior Court of California for the County of Santa Clara enjoined Horizon Pharma's exchange offer and proxy solicitation, agreeing with Depomed’s argument that its confidential information had been misused by Horizon Pharma, which had asked Kirwan to instead invalidate the “poison pill.”
“While we strongly disagree with the court's ruling, we are withdrawing our offer to acquire Depomed,” Timothy P. Walbert, Horizon Pharma’s chairman, president and CEO, said in a statement issued by the company yesterday. “While we are disappointed by the court's ruling, Depomed was only one of many attractive acquisition opportunities we have been actively pursuing.”
Horizon’s offer in July came to $29.25 per Depomed share, a 42% premium over the closing per-share price of $20.64 on July 6. The company’s latest offer shrunk to 0.95 of a Horizon share for each Depomed share, which valued the takeover target at $17.88 a share as of Thursday, when Depomed shares closed at $19.39.
