ProStrakan is one of Scotland's most promising drugmakers and specialises in pain relief treatments for cancer patients.
Japan's Kyowa Hakko Kirin looks to have emerged victorious in the battle to buy ProStrakan, one of Scotland's biggest biotechnology companies, agreeing a £292m deal on Monday.
The deal will land ProStrakan's founders, Harry Stratford and John Kanis, with a windfall of several millions of pounds for their shareholdings. Stratford, who later founded the Hampshire-based Shire Pharmaceuticals, started Strakan in his kitchen in the Scottish Borders in 1995. It then moved to a formerly derelict mill in Galashiels, where it is still based, and merged with the French biotechnology firm ProSkelia in 2004. Stratford floated the company in the same year.
Marking a further expansion by Japan's pharmaceutical industry into overseas markets, the Tokyo-based KHK is paying ProStrakan shareholders 130p in cash for each share. This represents a 41% premium to the price of 92.5p on 12 November, the last business day before takeover talks started. The news sent ProStrakan shares rocketing 21% to 131.25p.
ProStrakan, one of Scotland's most promising drugmakers, which specialises in pain relief treatments for cancer patients, is one-eighth owned by Norgine, a Dutch pharmaceutical company that bought the shares from Sanofi-Aventis in November. The Scottish firm fended off a bid from Norgine in November, saying it was too low and after evaluating several other approaches, its board decided to recommend the offer from KHK.
KHK has received irrevocable undertakings from shareholders controlling 47.6% of the shares, including Warburg Pincus, Aberforth, LMS Capital and Schroders – still short of the 75% it needs.
ProStrakan suffered two major drug setbacks last year and its chief executive, Wilson Totten, left in September after six years in the job. Its shares slumped to 44p, triggering interest from Norgine and other drugmakers. Since Totten's unexpected departure the firm has been run by Peter Allen, a former Celltech executive who played a key role in the Slough-based firm's sale to Belgium's UCB in 2004 and took over as ProStrakan's chairman from Stratford in December 2008.
Production in the US of Sancuso, one of the company's main drugs – a skin patch to prevent chemotherapy-induced nausea and vomiting – was halted when a contractor's factory closed for several months after an inspection by the US food and drug administration. Production resumed in December. ProStrakan also suffered delays in getting the green light from the US regulator for Abstral, a rapidly dissolving tablet for cancer pain.
Allen said on Monday that he was not expecting a counter-offer from Norgine. He said the KHK deal offered "a very nice fit – they know us very well". KHK has licences for Abstral in Japan and the far east and is also ProStrakan's partner for Sancuso in Japan. It is developing antibody products that should be available for sale in Europe from 2013, when KHK will benefit from ProStrakan's sales operations in the UK, France, Germany, Spain, Italy and other EU countries.
Singer analysts Shawn Manning and Elizabeth Kline said they had expected a deal in the 130p-140p range. "However, despite the clear upside for investors resulting from the bid, we note that it is somewhat ironic that the company initially began to seek an acquirer amidst concerns regarding US Sancuso manufacturing and the somewhat lengthy review periods for Abstral and Fortesta," they wrote. "US Sancuso manufacturing issues have now been resolved (supply is back on track), and both compounds have been approved by US regulators. One cannot help wonder considering whether 'deeper value' may have been realisable for shareholders had the market 'kept faith' with ProStrakan."
©guardian.co.uk
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