West Coast Editor
About a week after reporting solid second-quarter sales for its anti-nausea drug Aloxi for chemotherapy patients, MGI Pharmaceuticals Inc. disclosed its plan to buy out Guilford Pharmaceuticals Inc. for $177.5 million in cash and stock - thus adding to its cancer portfolio and more.
"We're really positioned well from an oncology standpoint, and we oriented our business development activities toward supplementing what we need to do in the future in acute care," said Lonnie Moulder, president and CEO of Minneapolis-based MGI.
Guilford's shares (NASDAQ:GLFD) jumped 41 percent Thursday, closing at $3.40, up 99 cents. MGI's shares (NASDAQ:MOGN) ended the day at $26.10, down $1.47.
The definitive merger agreement calls for MGI to acquire all of the outstanding shares of Baltimore-based Guilford for $3.75 per share in a taxable merger, adding up to $177.5 million. The amount paid per share includes $1.125 in cash and a fraction of MGI stock worth $2.625, and amounts to a premium of 55.6 percent over Guilford's closing price on July 20.
MGI expects to issue about 4.5 million shares in the merger, which is targeted to close in the fourth quarter of this year. The company said the transaction would be accretive starting in 2008, and net reductions in pre-tax income are expected to be $35 million next year and $25 million in 2007.
Moulder noted that MGI's Aloxi (palonosetron hydrochloride) for chemotherapy-induced nausea and vomiting (CINV) has more sales potential - in 2003, MGI agreed to pay at least $22.5 million to Helsinn Healthcare SA for the rights to Aloxi in post-operative nausea and vomiting (PONV) - which made the fit with Guilford even better. (See BioWorld Today, Nov. 18, 2003.)
Sales of Aloxi injection for CINV for the quarter ended March 31, 2005, and for last year were $57.2 million and $159.3 million, respectively.
To find Guilford, "we cast out the usual business development net and screened a variety of opportunities," Moulder said. "Really, Aquavan in the acute-care setting caught our attention. Gliadel, too, in oncology." Guilford's Aquavan is a Phase III candidate for procedural sedation. Gliadel is a marketed product for malignant gliomas and recurrent glioblastoma multiforme (brain cancer).
Farther back in the pipeline, Guilford has N-acetylated(alpha)-linked acidic dipeptidase for chemotherapy-induced neuropathy and poly(ADP-ribose) polymerase, a chemotherapy or radiation therapy sensitizer.
MGI, for its part, is awaiting word from the FDA on Dacogen (decitabine) for myelodysplastic syndromes, a cancer of the bone marrow, with a PDUFA date of Sept. 1.
The firm expects to submit by the end of the third quarter a new drug application for Saforis, an oral formulation of L-glutamine to reduce oral mucositis in patients getting anthracycline-based chemotherapy.
Last fall, MGI entered a marketing deal with SuperGen Inc., of Dublin, Calif., for Dacogen, and disclosed plans at the same time to buy Princeton, N.J.-based Aesgen Inc. for $32 million and Zycos Inc., of Lexington, Mass., for $50 million. Saforis came from Aesgen. (See BioWorld Today, Sept. 2, 2004.)
Although the MGI/Guilford deal is not the basic pharma takeover story, neither is it quite a merger of equals.
"We have about 300 people in our company, and Guilford has about 200," Moulder said. "We have guided revenues to $285 million for this year, so we're farther advanced because of the success we've had with Aloxi."
The Guilford merger has been under way "over the last few months at various levels of dialogue," though internally MGI has been discussing a possible buyout for "close to a year," he said.
MGI expects to maintain a presence in Baltimore, since that is where the Aquavan research and development team is located, along with the Gliadel manufacturing facilities, and most of the Guilford team will remain intact.