Valeant to eye other targets after Cephalon escapes

TORONTO Mon May 2, 2011 7:12pm EDT

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TORONTO (Reuters) - Valeant Pharmaceuticals International Inc is expected to turn its attention to other acquisition targets in the specialty pharmaceuticals landscape after pulling out of the race to buy Cephalon Inc on Monday.

Shares of the Canadian drugmaker fell as much as 10 percent, erasing some of the gains they have made since Valeant announced its takeover offer for U.S.-based specialty drugmaker Cephalon in March.

Israel's Teva Pharmaceutical Industries Ltd said on Monday it had reached a deal to buy Cephalon for $81.50-a-share, topping Valeant's $73-a-share bid.

But analysts said Valeant's push for Cephalon highlighted how aggressive Chief Executive Michael Pearson is likely to continue to be in healthcare dealmaking.

"There's going to be more deals. The way (Pearson) came out so aggressively going after Cephalon was an eye-opener for people," Susquehanna Financial analyst Gary Nachman said.

"This is just fueling more fire for the momentum we've seen as far as the M&A thesis goes in pharmaceuticals," he added.

The question for Pearson now is how he will spend the company's money. "If he sees something in the $6 billion range, he's demonstrated he's willing to go that high," Nachman said.

Shares of several drugmakers were trading up as investors bet that they would be next on Valeant's shopping list.

Forest Laboratories Inc's stock was up 5 percent on Monday; Medicis Pharmaceuticals was up 4 percent; Endo Pharmaceuticals was up 3 percent; Jazz Pharmaceuticals was up 3 percent; and Salix Pharmaceuticals rose as much as 3 percent.

Pearson had assured Valeant investors that he will be disciplined on price and would not overpay for Cephalon.

Pearson said in a statement that Teva's bid was "positive news" for Cephalon shareholders, which include Valeant. Valeant owns more than 1 million Cephalon shares.

Cephalon shares have gained 37 percent since Valeant made its bid public on March 29.

Shares of Valeant, which focuses on drugs in neurology and dermatology, fell 7 percent to C$46.41 on Monday afternoon on the Toronto Stock Exchange and were down 7 percent at $48.87 on the New York Stock Exchange. Valeant was trading at $44.39 before the Cephalon bid was announced.

Valeant has acquired about 20 companies in the last three years under Pearson's leadership. The biggest deal was its $3.3 billion merger with Biovail that gave Pearson the reins of the Canadian biotechnology company that assumed the Valeant name.

($1=$0.95 Canadian)

(Reporting by S. John Tilak in Toronto, Lewis Krauskopf and Jessica Hall in New York; editing by Peter Galloway)

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