Mallinckrodt Snaps Up Questcor for $5.6B

Mallinckrodt said today it will acquire Questcor Pharmaceuticals for about $5.6 billion, in a deal that broadens the buyer’s specialty drug portfolio with Questcor’s lucrative multiple sclerosis treatment H.P. Acthar Gel (repository corticotropin injection). 

Mallinckrodt reasons that Acthar is a strong complement to its portfolio of specialty pharmaceutical brands, including pain drug Ofirmev^® (Acetaminophen), which the company acquired when it snapped up Cadence Pharmaceuticals for $1.3 billion earlier this year.

Acthar is an injectable drug approved by the FDA for 19 indications, but increasingly used in the management of autoimmune and inflammatory conditions.In addition to MS relapses in adults, Acthar is also indicated for MS proteinuria associated with nephrotic syndrome, certain rheumatology-related conditions, and infantile spasms.

Acthar generated net sales for Questcor of $761.3 million in 2013, up 49.6% from calendar 2012. Acthar accounted for 95% of Questcor’s 2013 revenues: The company finished 2013 with a 57% jump in net sales, to $799 million, with adjusted net income growing 61% year-over-year, to $337 million.

Mallinckrodt’s portfolio also includes opioid Exalgo^® (hydromorphone HCI) for managing moderate to severe pain, and the oxycodone-acetaminophen combination acute-pain drug Xartemis™ XR. 

Last June, Questcor acquired rights from Novartis to develop and commercialize Synacthen^™ and Synacthen Depot in the U.S. and certain countries outside the U.S. Questcor is currently in the early stages of evaluating Synacthen in several potential indications being considered for possible U.S. clinical development, Mallinckrodt and Questcor said.

“We believe this transaction will provide a strong and sustainable platform for future revenue and earnings growth, and provide exceptional value for shareholders of both Mallinckrodt and Questcor,” Mallinckrodt President and CEO Mark Trudeau said in a statement. “It will substantially increase the scale, diversification, cash flow and profitability of our business, while expanding and enhancing the breadth and depth of our specialty pharmaceutical platform.

Questcor also provides specialty contract manufacturing services to the global pharmaceutical industry through its wholly-owned subsidiary BioVectra.

The deal—expected to be completed during the third quarter—has been approved by the boards of both companies and is subject to customary closing conditions.

Questcor shareholders will receive $30 cash and 0.897 Mallinckrodt shares for each share of Questcor common stock they own, pricing the deal at $86.10 per Questcor share. After completion of the merger, Mallinckrodt shareholders will own approximately 50.5% of the combined company’s stock, with the remaining approximately 49.5% to be owned by former Questcor shareholders.

The deal represents a premium of approximately 27% per share over Questcor's stock price, and a premium of about 33% over Questcor's trailing 20-trading-day volume-weighted average price, both as of April 4.

Mallinckrodt said the transaction is expected to be immediately accretive to its fiscal year 2014 adjusted diluted earnings per share, and significantly accretive in fiscal year 2015.