Danish drugmaker Lundbeck to acquire Ovation of US for $900 million

Danish drugmaker Lundbeck today said it would buy US-based Ovation Pharmaceuticals for up to $900 million in cash to build a North American commercial platform and boost mid and long-term growth. Pending antitrust clearances, the deal is expected to close in March 2009, Lundbeck said.

Lundbeck, which faces the expiry of patents on its cash cow antidepressant Cipralex/Lexapro in major markets as of 2012, said Ovation's pipeline was expected to drive growth significantly in the coming years through multiple new product launches. Lundbeck has repeatedly signalled its intention to buy a drug or an entire company to replace revenue likely to decrease when the Lexapro patents expire.

Lundbeck will make an upfront payment of $600 million upon closing. Additional payments of up to $300 million within one year of closing are contingent upon the achievement of certain product regulatory milestones relating to FDA approval of Ovation's Sabril treatment for adults with refractory complex partial seizures and children with infantile spasms. Sabril is in the final stage of FDA review.

Ovation, which makes a variety of niche products, including treatments for epilepsy and other neurological disorders, is privately held. It has in recent years been buying drugs with sales of often less than $100 million from large pharmaceutical companies and marketing them to various groups of specialist physicians. Lundbeck said that Ovation estimates 2008 sales of about $204 million with an operating profit of some $32 million.

''Ovation will provide a commercial platform in the US with a highly experienced management team and specialty sales force, a late-stage development pipeline and a proven scientific and regulatory expertise in areas of high unmet medical needs," said Ulf Wiinberg, president & CEO at Lundbeck. ''We are very encouraged by what Ovation has achieved in the short time since the company was founded and we look forward to working together in the common interest of both companies.''

''This is an exciting milestone for our employees and our company,'' says Jeffrey S Aronin, Ovation president and CEO. ''We've succeeded in achieving our mission of building a strong, fast growing business by developing important medications for unmet medical needs of severely ill patients - and Lundbeck shares that commitment."

Lundbeck lost out last year when it tried to boost its post-Cipralex prospects by buying Flurizan for $100 million from Myriad Genetics only for the Alzheimer drug to fail shortly afterwards in a late-stage trial.

Lundbeck reiterated its financial guidance for 2008, with revenue expected at between 11 billion to 11.5 billion Danish kroner and profit before tax at between 2.8 billion and 2.9 billion kroner excluding one-off items.