Valeant vows to restructure Cephalon as it moves in for the kill
Cephalon's aggressive strategy of snapping up smaller biotech companies has left the company with a much bigger and more diversified pipeline, but that only seems to be adding to the doubts about its future among some analysts who have been studying Valeant's $5.7 billion bid. And those doubts, they add, will play right into Valeant's hands as the fast-moving pharma player executes its hostile takeover strategy.
Christopher Rowane, portfolio manager at Huntington Funds, tells the Wall Street Journal that the recent death of Cephalon's founder along with the string of buyouts while working to replace its top-selling drug with a second-gen treatment led Valeant to strike while the biotech company is at a "low point." And the uncertainties may make it possible for Valeant to land Cephalon at a bid close to the $73 it offered investors on Tuesday.
"We would not expect Valeant to encounter a lot of resistance from CEPH shareholders given the uncertainties Cephalon faces," Cowen & Co. analyst Eric Schmidt said in a note. Harris Private Bank's Jack Ablin told Bloomberg that the deal would still be a steal at $73. "The deal is as cheap as I've seen... There could be a higher bid, but it would seem like a reasonable deal at least for Valeant and what they're looking to do."
Valeant's J. Michael Pearson, meanwhile, relishes the chance of getting his hands on the company.
"Whether they want to admit it or not, they face a huge restructuring. We're very good at restructuring," Pearson told analysts. Valeant has an R&D-light approach to the drug business, spending only in the mid-single digits of its sales revenue on research while Cephalon falls much closer to the industry standard at 18 percent and rising.
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