UPDATE 2-Flu remedy firm Afexa woos rival bidders

Wed Aug 24, 2011 5:12pm EDT

* Says in contact with several parties, upbeat on deal

* Hopes to have news for shareholders in coming weeks

* Board says Paladin does not value Cold-FX adequately (Adds details from third paragraph)

By Pav Jordan

TORONTO, Aug 24 (Reuters) - Afexa Life Sciences Inc FXA.TO, maker of Cold-FX, Canada's most popular over-the-counter flu medicine, is optimistic it can find a white knight to block a C$56.7 ($57.3 million) hostile bid from Paladin Labs PLB.TO.

Afexa Chairman Bill White told Reuters in an interview on Wednesday that the company has held talks with several interested parties, but he declined to be more specific.

"I am not going to speculate that it (an alternative deal) will happen," said White. "But I can tell you I am quite optimistic based on the number of meetings we are having and the kind of interest that we're having."

Growing competition for access to approved and marketable drugs have bolstered merger and acquisition activity in big pharma as well as specialty pharma in North America.

Montreal-based Paladin is offering 55 Canadian cents a share or 0.013 of a Paladin share for each Afexa share it does not already own, valuing the entire company at C$56.7 million. It is bidding separately for Labopharm Inc DDS.TO, a Canadian biotech company specializing in controlled-release drugs, in a friendly deal worth C$20 million.

Afexa's board said on Tuesday that Paladin's Aug 10 offer undervalues the Edmonton, Alberta-based firm, which had been buying back shares to boost its stock value.

Paladin said last month it had accumulated almost 15 percent of Afexa. After the two sides failed to reach a friendly arrangement, Afexa adopted a poison-pill defense, and started seeking bidders willing to pay more than Paladin.

White said on Wednesday he had to get back to shareholders before the Paladin bid expires on Sept. 15.

"We've had really good success in terms of people who we have reached out to as well as incoming interest," White said by telephone.

"We're aggressively pursuing these alternatives and believe that we'll be able to bring something to shareholders that allows them to see the Paladin offer in the light that we do as well as other opportunities to maximize value."

Cold-FX is practically a household name in Canada and the company plans to sell the cold remedy in China, Japan and the United States.

White said Afexa has held discussions with partners as it evaluates most effective way to bring the product to market in China as soon as possible. He could not provide a timeline for when it could hit supermarket shelves there.

He said Afexa's Coldsore-FX, launched in Canada in recent months, appeared to be doing well, with retailers stacking shelves ahead of the cold sore season in the autumn.

"From a board point of view, it is pretty clear the current offer is not even valuing Cold-FX in Canada appropriately," White said of the product that is its top revenue generator. ($1=$0.99 Canadian) (Reporting by Pav Jordan; editing by Janet Guttsman)

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