* To pay $86.10 per Questcor share, a premium of 27 pct
* MS drug Acthar Gel sales expected to hit $1.9 bln in 2018
* Mallinckrodt shares fall as much as 10 pct
(Adds analyst comment, updates shares)
By Esha Dey
April 7 Specialty pharmaceuticals company
Mallinckrodt Plc will buy drugmaker Questcor
Pharmaceuticals Inc for about $5.6 billion to gain
access to its multiple sclerosis drug, Acthar Gel, which is set
to hit sales of $1 billion this year.
The acquisition is Dublin-based Mallinckrodt's second in
less than two months as it pushes into the lucrative specialty
drugs market, which focuses on complex and chronic diseases.
Mallinckrodt's shareholders took a dim view of the deal,
however, pushing the company's shares down as much as 10
Questcor has been facing federal probes into its marketing
practices related to Acthar and multiple accusations from
short-seller Citron Research.
The company's shareholders will receive $30 in cash and
0.897 Mallinckrodt shares for each share held, for a total value
of about $86.10 per Questcor share, the companies said in a
statement on Monday.
Questcor's shares were trading at $77 on the Nasdaq on
Monday afternoon. Mallinckrodt was down 6 percent at $58.50 on
the New York Stock Exchange.
The deal - the latest in a series of acquisitions structured
to take advantage of Ireland's low corporate tax rate -
represents a 27 percent premium to Questcor's Friday close.
Acthar is approved by the U.S. Food and Drug Administration
for 19 conditions, many of which are associated with autoimmune
and inflammatory diseases, including multiple sclerosis and
"We currently expect solid double-digit revenue growth for
Acthar to continue in the future, driven by educational efforts
and further expansion into indications currently on the Acthar
label," Mallinckrodt Chief Executive Mark Trudeau said on a
Almost all of Questcor's revenue comes from the drug, which
had annual sales of about $760 million in 2013, an increase of
about 50 percent from 2012. The company acquired the drug from
Aventis for $100,000 in 2001.
Questcor's stock fell to below $20 in September 2012 as U.S.
government agencies, including the Securities and Exchange
Commission, launched investigations into the company's marketing
practices and health insurer Aetna Inc cut
reimbursement for the drug. The investigations are still on.
The company has also faced repeated accusations from
short-seller Citron Research regarding the drug's high price and
The injectable drug, a formulation of pituitary hormones
extracted from pigs, is priced at about $30,000 per vial.
Acthar is expected to touch $1.9 billion in sales in 2018,
according to Thomson Reuters data.
Originally developed as a treatment for infantile spasms,
Acthar has an orphan drug exclusivity until Oct. 15, 2017 for
The deal values Questcor at 12 times forward earnings, well
below the median of 18.4 for the broader pharmaceutical
industry, according to Thomson Reuters StarMine data.
In the 12 months to Friday's close, Questcor's stock had
risen more than 125 percent. Still, the stock trades at a strong
discount to its median 10-year historical price-to-earnings
Stocks of several high-growth biotechnology companies, which
led a rally in the broader market in 2013, fell on Friday,
making investors anxious about how much further they may fall.
Barclays analyst Ying Huang said the recent selloff in
biotech stocks puts more companies in the "sweet spot," with a
market capitalization of $1 billion to $10 billion, where
potential acquirers might give them a look.
Big pharmaceutical companies facing patent expirations still
need to replenish pipelines, he said.
Mallinckrodt, which traces its roots back to 1840 in St.
Louis, Missouri, makes drugs for pain management, cerebral and
spinal spasticity, inflammatory diseases and depression. It also
makes generic drugs and active pharmaceutical ingredients.
The company, which bought Cadence Pharmaceuticals Inc
for $1.3 billion in February, had revenue of $2.2
billion in 2013.
Mallinckrodt, which was spun off from Covidien Plc
in July last year, said it expected the deal to add to adjusted
earnings in 2014 and significantly boost adjusted profit in
Mallinckrodt will fund the deal through cash on hand and
debt financing from Barclays, which also advised the company.
The deal is expected to be completed in the third quarter.
Wachtell, Lipton, Rosen & Katz and Arthur Cox were
Mallinckrodt's legal advisers in Ireland.
Centerview Partners was Questcor's financial adviser, and
Latham & Watkins LLP and Matheson were its legal advisers in
(Additional reporting by Susan Kelly; Editing by Kirti Pandey
and Saumyadeb Chakrabarty)