Irvine-based eye drug maker Ista Pharmaceuticals Inc. has fired a warning shot and hired an investment bank to pursue options in the wake of its rejection of a $327 million takeover bid by Valeant Pharmaceu-ticals International.
Ista Chief Executive Vince Anido said the company’s board “took into consideration” what he called Valeant’s “threat, repeated by your financial advisors, to move unilaterally and make an offer directly to our shareholders—a move which could obviously be destabilizing to our employees and our business.”
Ontario, Canada-based Valeant has said it sees an acquisition of Ista as a way to spur growth of its “smaller ophthalmology operations.” Its offer will stand until Jan. 31, the company said.
Ista has hired New York-based investment bank Greenhill & Co. to review strategic options. Those could range from a sale or merger to an acquisition of its own, with prescription or over-the-counter drug businesses a likely target in such a case.
Ista flatly rejected the hostile bid from Valeant Pharmaceuticals International, which comes to $6.50 a share—a 67% premium from Dec. 15, a day before the offer became public.
Ista’s shares have since risen above $7, to a market value of about $300 million last week. Anido said in an investor call that Valeant’s bid wasn’t in the best interest of the company’s shareholders, and that Ista expects “significant revenue growth in 2012 and beyond.”
• Headquarters: Ontario, Canada<br >• Founded: 1960<br >• Ticker symbol: VRX (NYSE)<br >• Market value about $15.3 billion<br >• Notable: Gave Jan. 31 deadline for Ista to accept offer or provide more information on operations
Ista has projected 2012 revenue between $180 million and $195 million. The company expects profits in a range of $11.6 million to $14.9 million.
Wall Street expects Ista’s full-year revenue to be $195.7 million. Analysts expect the company to post a $17 million profit in 2012.
“We are interested, but unwilling to spend too much time” on a deal for Ista, according to a Securities and Exchange Commission filing by Valeant.
Anido, in a letter to Valeant Chief Executive J. Michael Pearson, said Ista’s board “takes your (bid) and its fiduciary responsibilities very seriously.”
Anido said that the board “ultimately decided it did not have enough information or justification to proceed or provide you with non-public information at that time.”
A buy of Ista—whose drugs include Bromday for treating pain and inflammation after cataract surgery, and Bepreve for eye allergies—would follow an established pattern for Valeant, which makes drugs to treat skin conditions, nervous system disorders, and other ailments. It’s grown to a market value of about $15 billion through buying and marketing older products for treating conditions that get less attention from Big Pharma.
• Headquarters: Irvine<br >• Founded: 1992<br >• Business: drug maker<br >• Ticker symbol: ISTA (Nasdaq)<br >• Market value about $301 million<br >• Notable: Rejected $327 million bid from Valeant Pharmaceuticals, hired investment bank to pursue options
“I think what’s good about Valeant is that they’re very disciplined when it comes to price,” analyst Gary Nachman of Bala Cynwyd, Pa.-based Susquehanna Financial Group, told Bloomberg. “If it doesn’t work, then they’ll move on.”
Nachman said Valeant’s broad range of products make many companies possible deal candidates.
Last year saw Cephalon Inc., a Frazer, Pa.-based biotechnology company, reject a multibillion-dollar takeover bid by Valeant. Cephalon was eventually bought by Israel-based Teva Pharmaceutical Industries Ltd., which employs 500 workers in Irvine.
Valeant has roots in Orange County—one of its predecessor companies was Costa Mesa-based ICN Pharmaceuticals Inc., founded in the early 1960s by Milan Panic, a former prime minister of Yogoslavia.
ICN changed its name to Valeant and later moved to Aliso Viejo. Biovail Corp. bought Valeant in 2010, took its name and moved its operations to Canada.
Pearson, a turnaround specialist who came from New York-based consultancy McKinsey & Co., was named Valeant’s chief executive in early 2008. He replaced Tim Tyson, who came under fire in late 2007 because of losses and what some observers considered a lack of strategic direction.
