PDL BioPharma has gone public with its attempt to buy Neos Therapeutics. The investment group told the world of its desire to buy the ADHD specialist after twice being rebuffed.
Incline Village, Nevada-based PDL put a $10.25-a-share offer to Neos in June. Days later, Neos carried out a dilutive financing at $6.25 share. That meant, all else being equal, PDL would have to pay more to buy Neos. Despite that, PDL kept its bid at $10.25 a share. Neos’ board recently rejected that second, effectively improved offer.
PDL has now gone public with its plans, a move it says was motivated by Neos’ “board's refusal to negotiate in good faith toward a transaction.” The $10.25-a-share offer represents a 40% premium over Neos’ stock price just before news of PDL’s plans broke. Neos’ stock rose more than 35% on the back of the news, closing just shy of the offer price at $10.05.
If PDL can complete the deal, it will add two approved drugs and one near-market pipeline prospect to its portfolio. Neos has built its business on extended-release and orally disintegrating tablet technologies. The technologies underpin its approved pediatric formulations of amphetamine and methylphenidate, as well as a second amphetamine formulation that is awaiting approval by the FDA.
PDL’s pitch to Neos is based on a belief that its resources can accelerate adoption of these products and the development of new drugs based on the same technologies. That pitch, and the cash tied to it, failed to woo Neos’ board. The question now is whether dialing up the pressure on Neos will deliver a breakthrough.
The board unanimously rejected both of the earlier offers on the grounds they failed to reflect its “strategic value and future prospects for continued growth and value creation.” Neos’ board is now considering the latest offer. But, given the board felt the last $10.25-a-share offer “substantially undervalued” the company, it is questionable whether its position will change.