Sucampo Pharmaceuticals, Inc. (NASDAQ:SCMP) stock surged in early trading on Tuesday after the company finalized an agreement to sell itself to Mallinckrodt PLC (NYSE:MNK) for $2.1 billion. Excluding debt, the acquisition is valued at approximately $840 million.
Sucampo Pharmaceuticals to be acquired by Mallinckrodt
Mallinckrodt will pay $18 per share, which is a 6% premium on the price of Sucampo Pharmaceuticals stock at the close of regular trading hours on Friday. Thomson Reuters data indicates that the acquisition’s equity value is based on about 46.64 million outstanding shares of the company. Mallinckrodt plans to pay for the acquisition using a combination of cash on hand and by borrowing under its current revolving credit facility and under a new secured term loan. The acquisition will be completed under its subsidiary Sun Acquisition Co.
According to Reuters, the biopharmaceutical firm’s shares have climbed by approximately 14% since earlier this month before Bloomberg initially reported that it was considering being acquired after another firm had expressed interest in buying it out.
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Mallinckrodt tries to support its stock price
In contrast, Mallinckrodt stock has tumbled by more than 50% year to date, driven lower by a handful of major setbacks. According to The Wall Street Journal, a sharp decline in sales of the company’s opioid drugs has pulled its stock down after regulators began scrutinizing its “aggressive sales practices,” and the broader crackdown on opioid prescriptions hasn’t helped either.
Bloomberg adds that Mallinckrodt’s autoimmune and rare disease drug Acthar has also been an overhang due to controversy regarding its very high price tag. Further, the company lost a court ruling for its respiratory treatment for infants, INOmax, which means generic versions of it could be coming to the market soon. Meanwhile, Mallinckrodt’s own generic-drug segment has been struggling. Well-known research firm Citron has been targeting the drug maker this year, arguing that its stock is heading to $0 and even accusing its CEO of “fraud.”
Sucampo Pharmaceuticals will add to Mallinckrodt’s rare disease treatments
If the acquisition closes sometime during the first quarter of the new year, Mallinckrodt expects to see at least 30 cents per share added to its full-year 2018 adjusted earnings per share. For 2019, the company expects the gain to be at least 60 cents per share. In the most recently completed quarter, Sucampo Pharmaceuticals posted strong sales growth as its constipation drug Amitiza drove its top-line strength. As a result of that strength, the biopharmaceutical firm boosted its sales projection for the full year.
In addition to Amitiza, Sucampo Pharmaceuticals will also add other treatments for rare health problems to Mallinckrodt’s drug portfolio. The drug maker has a collaboration and licensing agreement in place for Amitiza with Takeda Pharmaceutical in several countries, which includes the U.S. and Canada, its website states. Sucampo has another two rare disease drugs currently going through the late stages of clinical trials.
Immediately after the deal was announced, Sucampo Pharmaceuticals stock surged by as much as 5% to $17.85 in premarket trading. Mallinckrodt stock climbed by as much as 0.77% to $23.50.