12:00 AM
 | 
Dec 03, 2007
 |  BioCentury  |  Finance

Ebb & Flow II

The $1.7 billion in cash that GlaxoSmithKline (LSE:GSK; GSK) paid for specialty pharma company Reliant is not providing a hefty return for some of the latter's long-term investors.

Alkermes (ALKS), which owns 12.9% of Reliant, will get $166 million at deal close, with up to an additional $8 million subject to the conditions of an escrow arrangement. The company paid $100 million for this stake in 2001, putting the return at less than 2X.

ALKS tried to acquire Reliant outright in 2002, proposing to pay $847 million in stock for the remaining Reliant shares. But the deal fell through after a delay in FDA approval of schizophrenia drug Risperdal Consta caused ALKS shares to fall below the range required to close the transaction. That deal put Reliant's total value at about $947 million, or 3.4 times its 2001 sales of $277 million.

For the nine months ended Sept. 30, Reliant had $341 million in sales. If FY07 sales come in at about $455 million, the current offer is only slightly sweeter, at 3.7 times estimated 2007 sales.

Reliant filed for an IPO to raise up to $400 million earlier this year, its second attempt at going public. It withdrew its 2005 offering to raise up to $300 million because of market conditions(see BioCentury, August 13).

When Reliant filed this year, other principal stockholders included PharmBay Investors (26.9%) and Bay City Capital (19.8%).

Reliant's biggest-selling product is Lovaza, which posted nine-month sales of $206 million for use as an adjunct to diet to treat hypertriglyceridemia. It has the U.S. rights from Pronova (OSE:PRON). GSK said the compound derived from omega-3 complements its Coreg CR, which is marketed for heart failure and hypertension.

Reliant also markets Rythmol SR for arrhythmia and hypertension drugs DynaCirc CR and InnoPran XL. The deal is expected to close this month.

Selling on strength...

MGI Pharma (MOGN) was one of a pair of companies to announce last week that it's investigating strategic alternatives. The company also said it had hired Lehman as an advisor.

MOGN has climbed by almost one-third since late September when the company submitted an NDA to FDA for Aquavan fospropofol for use as a sedative-hypnotic agent in patients undergoing brief surgical or diagnostic procedures.

In 3Q07, MOGN also beat Street EPS expectations by $0.09, coming in at $0.30. Sales of its Dacogen decitabine to treat myelodysplastic syndromes (MDS) were $34.6 million, up 191% from $11.9 million in 3Q06. Total revenues rose 16% to $112.5 million from $97 million in 3Q06.

Last week, the shares hit a new all-time high, as MOGN finished up $5.20 (18%) to $34.61.

...and on weakness

By contrast, shares of QLT (TSX:QLT; QLTI) had dipped to an all-time low prior to its announcement last week that the company had formed a committee to review strategic alternatives, including the sale of all or part of the ophthalmic, dermatology and cancer company's assets. The company said it would select a banker soon.

Read the full 2481 word article

User Sign in

Trial Subscription

Get a 4-week free trial subscription to BioCentury

Article Purchase

$150 USD
More Info >