Ireland’s Horizon Pharma launches $3-bn hostile buyout bid for US rival Depomed

Irish biopharmaceutical firm Horizon Pharma Plc has submitted a hostile $3-billion offer to acquire smaller US rival Depomed Inc, aiming to generate significant revenue and tax savings.

Horizon has offered to buy all outstanding shares of Depomed for $29.25 per share in an all-stock deal valued at approximately $3 billion. The offer price represents a 42-per cent premium to the closing price of Depomed on Monday, the day prior to the submission of the offer.

Further to the news, Depomed surged nearly 40 per cent to end at $28.62 yesterday on Nasdaq.

Post closing, Depomed shareholders would own approximately 25 per cent of the combined company.

The combined entity will have 13 marketed drugs, which nearly doubles Horizon's current portfolio of seven,and is expected to result in 2015 net sales of over $950 million.

Horizon's chairman, president and chief executive officer Timothy Walbert said in a letter to James Schoeneck, president and CEO of Depomed, ''Over the last several months, we have attempted to convince your board of directors and you that the combination of Horizon Pharma, Inc., a wholly-owned subsidiary of Horizon Pharma plc, and Depomed, Inc. is strategically and financially compelling for our respective companies and shareholders.''

 ''Given the significant revenue and operating synergies, as well as considerable tax savings, we would create substantial long-term value for Depomed's shareholders in addition to the immediate value realized through the proposed premium,'' Walbert further stated.

He added, ''To demonstrate our commitment to the proposed transaction, we sent you a letter on May 27, 2015, offering an all-stock transaction in which Depomed shareholders would receive $29.25 in Horizon ordinary shares, a 40 percent premium to Depomed's trading price at the time. Since sending the letter, we have repeatedly attempted to engage with your board and advisors as well as you, including sending a follow-up offer letter on June 12th, which reiterated our proposal and set out again the merits of the combination. Unfortunately, your board and you have rejected our proposal and refused to meet or to engage in any discussions with us.''

Newark, California-based Depomed is a specialty pharmaceutical company focused on drugs to treat pain and neurology related disorders. Its products include Nucynta for management of pain, Gralise for postherpetic neuralgia, Cambia for acute migraine and Zipor, a non-steroidal drug for pain in adults, etc.

Early this year, Depomed bought the rights to Nucynta from Johnson & Johnson for $1.05 billion.

Its Glumetza drug has been approved for the treatment of type II diabetes in adults, and is sold in the US by Valeant Pharmaceuticals.

It has also developed and licensed a unique drug-delivery technology called Acuform – a patented oral-delivery technology that allows targeted extended release of pharmaceutical compounds into the upper gastrointestinal tract.

In 2014, Depomed reported revenue of $390 million with net income of $132 million.

The transaction is expected to be substantially accretive to Horizon's diluted earnings per share with immediate effect.

The Irish company said it had made repeated attempts since March to engage in friendly negotiations with Depomed management, which rejected the proposals. Now, Horizon has taken its offer to Depomed shareholders for their support and further engagement of the board and management for fruitful talks.

Depomed said in a separate statement that it had received an ''unsolicited, highly conditional, non-binding'' proposal to acquire the company, which was identical to Horizon Pharma's earlier takeover attempts.

Dublin-based Horizon Pharma markets seven medicines through its orphan, primary care and specialty business units for the treatment of arthritis pain and rare diseases. Its Duexis, Pennsaid, Vimovo and Rayos drugs are used in the treatment of arthritis pain and inflammation, while it's Buphenyl, Ravicti And Actimmune drugs are used for treatment of rare diseases.

Apart from Ireland, the company has operations in the US, Germany and Switzerland.

The company reported a 118-per cent jump in revenue at $113 million for the first quarter, compared to $52 million for the same quarter a year ago. Net loss for the period reduced from $206 million to around $20 million.

For the current year, the drug maker has increased its guidance by about 30 per cent to $590-$610 million, on the back of its newly-launched non-steroidal osteoarthritis pain reliever Pennsaid 2%, and strong performance from its arthritis drugs Duexis and Vimovo.

Moreover, Horizon's recent acquisition of biopharmaceutical firm Hyperion Therapeutics Inc will diversify its product portfolio by adding two drugs Ravicit and Buphenyl for the treatment of urea cycle disorders.

Citigroup Global Markets Inc and Jefferies LLC are acting as lead financial advisors to Horizon on the proposal while Depomed is advised by Morgan Stanley & Co LLC and Leerink Partners LLC.