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Takeover hostilities resume between Depomed and Horizon

Published on 10/08/15 at 09:41am
Nucynta (tapentadol)
Depomed says Horizon's bid is based on illegal use of information about Nucynta

The bitter takeover row between Horizon and Depomed has escalated after Depomed dismissed its suitor’s latest advances, and warned it was willing to go through ‘protracted litigation and a proxy fight’.

In a public letter to Horizon Pharma, Depomed dismissed the latest move in the Dublin-based company’s strategy, saying “it does not make any sense to engage unless you [Horizon] make a sufficiently compelling and detailed proposal.”

Horizon has made several offers for Depomed, which specialises in making pain management drugs and treatments for neurological disorders. So far two – at $29.50 and $33 per share – have already been rejected.

Horizon chief executive Timothy Walbert has been pursuing Depomed since March, and went public after the Depomed board refused to entertain his company’s unsolicited offer.

Recently serial acquirer Horizon adopted a new strategy to bring Depomed to the negotiating table, by increasing the percentage of Depomed stock it owns from about 1% to 10%. This would trigger a special meeting of Depomed’s shareholders, where Horizon would propose to remove all of Depomed’s board members and change the company’s bylaws to make a takeover easier. In response, Depomed recently adopted a plan to dilute its stock if a shareholder bought more than 10% of its stock – in a pre-emptive move to fend off Horizon’s further advances.

At the same time, Horizon said it was filing a lawsuit to challenge Depomed’s position. Depomed is filing a lawsuit of its own, alleging that Horizon’s acquisition bid “is predicated on the improper and unlawful use of highly confidential and proprietary information” relating to Depomed’s star product, the painkiller Nucynta (tapentadol).

On Friday, Depomed escalated the hostilities even further by publishing the letter it sent to Timothy Walbert. In the letter, Depomed argues that “it does not make any sense to engage with Horizon” until Horizon increases its acquisition proposal and adds a cash component of ‘up to 25%’.

Depomed chief executive Jim Schoeneck maintains in the letter that Walbert’s bid undervalues the company, and does not account for the ‘strong’ earnings results and ‘promising outlook’, it continues. Depomed’s latest financial results show it scored record second quarter 2015 sales of $94.3 million, up 234% compared to the second quarter of 2014. Nucynta had a strong second quarter performance, with sales of $56.7 million.

Schoeneck writes: “As we have previously told you, in order to be compelling, a proposal must reflect what Depomed would contribute to the combined company, as well as the value of synergies from the transaction.

And the letter ends: “Your willingness to increase your proposal is an obvious recognition that the vast majority of our shareholders do not support what you have proposed. Our Board takes its fiduciary duties seriously and will always be open to any compelling proposal that creates value for its shareholders. But we are prepared and committed to take actions that we deem appropriate to protect our shareholders' interests, even if it involves protracted litigation and a proxy fight.”

­Lilian Anekwe

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