Valeant could raise Cephalon bid if it sees books

TORONTO (Reuters) – Valeant Pharmaceuticals International Inc (VRX.TO: Quote, Profile, Research) said on Monday it might be willing to increase its $5.7 billion offer to buy Cephalon Inc (CEPH.O: Quote, Profile, Research) if the U.S. drugmaker opens its books to allow due diligence.

Valeant announced an unsolicited takeover bid for Cephalon on March 29 that valued the company at $73 a share. Cephalon’s shares have since traded above that level, suggesting investors expect a higher offer.

The shares were at $76.54 on Monday.

It was not the first time that Valeant has said it might sweeten its bid, underscoring the urgency of its wish to resolve issues quickly as takeover activity in the pharmaceuticals sector heats up.

“Valeant reaffirms its position that it would be willing to increase its offer price modestly if Cephalon’s board of directors would allow Valeant to conduct due diligence and the results of such due diligence support a higher offer,” Valeant said on Monday.

There are several other takeover deals bubbling in the sector. Among them, Endo Pharmaceuticals Holding Inc (ENDP.O: Quote, Profile, Research) struck a deal on Monday to buy American Medical Systems Holdings Inc (AMMD.O: Quote, Profile, Research), a medical devices maker, for about $2.6 billion in cash to strengthen its key urology franchise.

Cephalon rejected Valeant’s offer last week, saying it undervalues the company, its key assets and its prospects.

Valeant has filed with the U.S. Securities and Exchange Commission to replace Cephalon’s board.

“Given Cephalon’s rejection of Valeant’s offer and refusal to engage in discussions, completing a transaction may only be possible following the written consent solicitation with a new board of directors in place,” Valeant said in a statement.

In a separate statement, Cephalon said on Monday that board member Charles Sanders retired from his post on April 8, citing health reasons. The statement also said there was no disagreement between Sanders and the company that led to his decision.

Mississauga, Ontario-based Valeant says it is eager to get a deal done quickly, and it points to a likely steep drop in Cephalon’s earnings after 2012, when it loses patent protection for its top-selling sleep-disorder drug Provigil.

The pharmaceuticals industry faces a much-discussed “patent cliff” over the next few years as many of big-selling drugs lose exclusivity and revenues fall due to the rise of generic competition.

Many large drugmakers are seeking to fill those revenue gaps with deals for companies with promising experimental medicines or new biotechnology drugs that do not face immediate patent issues.

Valeant’s offer represented a 29 percent premium to Cephalon’s 30-day trading average when the bid was announced, roughly in line with industry precedents in recent years.

Some Cephalon shareholders say they are looking for a higher bid, closer to the $80 a share level.

($1=$0.96 Canadian)

(Reporting by Pav Jordan; editing by Janet Guttsman and Peter Galloway)

Valeant could raise Cephalon bid if it sees books