Questcor Pharmaceuticals Inc. and Avanir Pharmaceuticals Inc.—two Orange County drug makers with one commercial product each—are subjects of market speculation on possible moves by a cash-rich drug developer in Ireland.
Industry watchers say that Dublin-based Elan Corp., which sold the rights to its only drug in a recent $3.25 billion deal—is likely to use some of that money to get an established drug because it recently sold its last major product.
“These guys are now running around with lots of cash and they are looking for things to buy,” said Greg Presson, a managing director in the Newport Beach office of Los Angeles-based investment bank B. Riley & Co. “Orange County’s a pretty fertile environment for that.”
Anaheim-based Questcor makes injectable H.P. Acthar Gel.
Questcor has annual revenue of $509.3 million, is profitable, and counted a recent market value of about $1.7 billion. The drug maker primarily sells Acthar for treating nephrotic syndrome, a kidney disease; multiple sclerosis flare-ups and infantile spasms.
Acthar could be attractive to a potential acquirer based on what company officials have described as a “pipeline in a bottle” because it is approved for 19 different conditions.
Questcor has been careful in promoting the drug—it started a program last year to sell Acthar for rheumatology.
Aliso Viejo-based Avanir’s sole drug is Nuedexta, which is used to treat pseudobulbar affect, a neurological disorder that’s marked by uncontrollable fits of laughing or crying.
Avanir, which has annual sales of $41.3 million but is not profitable, counted a recent market value of $406.1 million.
Avanir also has a pair of drug candidates in its pipeline that are being tested for larger markets such as treating agitation in Alzheimer’s disease, central neuropathic pain in multiple sclerosis, involuntary movements brought on by the use of another Parkinson’s disease drug, and other neurological and psychiatric disorders.
Questcor and Avanir declined comment on the recent speculation.
Elan could see Avanir as a potential target because it already sells Nuedexta with an established sales force and Avanir “could benefit from a larger infrastructure, greater capital and a larger balance sheet,” RBC analyst Michael Yee told Bloomberg last month.
Yee also mentioned Questcor as a potential deal for Elan (see related Special Report: Mergers & Acquisitions, page 23).
Elan’s cash stockpile is expected after a deal it struck last month agreeing to sell its rights to multiple sclerosis drug Tysabri, its sole major product, to Cambridge, Mass.-based Biogen Idec Inc. for $3.25 billion and royalty payments.
Tysabri had sales of $1.6 billion last year. The deal calls for Elan to receive 12% of Tysabri’s net sales for the first year, with royalty payments set to increase based on Tysabri’s annual sales.
Elan will no longer have a major product once that deal goes through, which is expected to take place by the end of June.
The Biogen Idec deal will give Elan some $2.9 billion in cash even after it spends about $1 billion on stock buybacks, according to Bloomberg. Elan’s cash balance is equal to about 45% of its late February market value of $6.3 billion, and higher than 99% than its peers in the specialty drug market.
Elan itself is the subject of a takeover bid by New York-based private equity firm Royalty Pharma. Royalty has offered $6.6 billion to buy Elan, which the Irish drug maker’s board has rejected.
