King’s Bigger Bid Still Too Low, Alpharma Board Says

Alpharma urges shareholders to reject King’s $37 per-share bid, as the firm pursues a sale at a higher price.

"Multiple parties" are indicating interest in a business combination with Alpharma, the company's board of directors said in a letter to shareholders Sept. 26, urging them to reject King's $1.6 billion hostile bid for the company.

"We believe other offers or alternatives to the King offer may emerge from this auction process that will provide shareholders with greater value than $37 per share," Chairman Peter Tombros and CEO Dean Mitchell say in the letter.

King upped its bid for Alpharma from $33 per share to $37 Sept. 11, appealing directly to shareholders after Alpharma's management already had rejected the lower bid - first privately, then publicly (¹ (Also see "King Appeals Directly To Alpharma Investors To Clear Buyout" - Pink Sheet, 11 Sep, 2008.)). King's unsolicited tender offer for all Alpharma stock is set to expire Oct. 10.

Other potential bidders have approached Alpharma since King made its offer public, and those companies have begun conducting due diligence. One has provided a written offer at a higher per share price than King's $37 bid, according to the letter.

Still, Alpharma said it would consider another higher bid from King as well as bids from outside parties. The stock has traded at close to $37 since King announced its latest offer, and closed Sept. 26 at 37.25. Prior to King's initial public offer Aug. 22, the stock was trading much lower; it closed Aug. 21 at $24.04. The King offer represents a 67 percent premium over the closing price of Alpharma on Aug. 4, the date of King's initial private proposal to Alpharma.

For now, the company said King's offer is an attempt to "take advantage" of FDA's upcoming review of the extended-release, abuse-deterrent morphine capsule Embeda ahead of a potential approval.

"This priority review represents another example of Alpharma's ability to create long-term value that should rightfully inure to the benefit of Alpharma's shareholders, and not to the King group or King's shareholders," Alpharma said.

King/Alpharma combo would create specialty pain powerhouse

Bridgewater, N.J.-based Alpharma's pain portfolio and pipeline is attractive to King as it transitions to a specialty company focused on pain therapeutics.

The company is re-inventing itself following the December 2007 launch of generic versions of the ace inhibitor Altace (ramipril), previously King's top-selling drug. King markets the morphine extended-release Avinza , which it acquired from Ligand in February 2007, and the muscle relaxant Skelaxin (metaxalone).

The firm is looking to bring additional pain products to the market: Remoxy , an abuse-deterrent, gel-capsule formulation of oxycodone pending at FDA, and Acurox , an abuse-deterrent, short-acting oxycodone formulation in Phase III.

The addition of Alpharma's portfolio would create something of a pain powerhouse. The company's two marketed drugs are both in pain, Kadian (morphine sulfate extended-release) and the non-steroidal anti-inflammatory patch Flector Patch (didofenac epolamine 1.3 percent).

In addition to Embeda, pending at FDA, the firm has several other pain projects in the pipeline and also announced Sept. 22 its intention to license Eladur , a bupivacaine transdermal patch in development for the treatment of pain associated with post-herpetic neuralgia from Durect for $20 million upfront plus milestones (² (Also see "Alpharma Pain Franchise Adds Durect’s Eladur" - Pink Sheet, 22 Sep, 2008.)).

King appeals to shareholders

King responded to the latest from Alpharma in a same-day statement, noting its bid is "the only outstanding offer for Alpharma."

"Given the uncertainty in the financial markets, we believe it is in the best interests of Alpharma stockholders to consummate our transaction as quickly as possible," King said.

The company is unlikely to complete a takeover in the near-term, however, since Alpharma adopted a shareholder rights plan Sept. 1 aimed at guarding against a hostile takeover. The plan, which allows shareholders to buy stock at a discounted price, becomes exercisable if any person acquires 15 percent or more of Alpharma's Class A common stock or commences a tender offer that could result in a person owning 15 percent or more.

-Jessica Merrill ([email protected])