Dainippon-Sepracor Deal Emerges

Today, Dainippon Sumitomo and Sepracor (SEPR) have announced the successful completion of the initial share offering period, where almost 78.2% of Sepracor’s shares were tendered. The offer period has been extended to Oct 19, 2009, to enable other shareholders to tender their shares as well. 

As a reminder, in September, the Japanese pharmaceutical company Dainippon Sumitomo Pharma Co had announced a deal to acquire Sepracor at $23 per share or $2.6 billion. However, soon after the announcement, shareholders of Sepracor filed a suit in a Delaware court against the company, citing the offered price as inadequate. They were seeking the court’s intervention to stop the deal and pay damages. 

Additionally, certain aspects of the deal were against the interest of Sepracor’s shareholders. The deal included a $77.4 million termination fee and a “no solicitation” provision. Apart from restricting the possibility of any superior proposal, these provisions give the acquirer time to match any other offer. In addition, the board of directors of Sepracor was being investigated by Levi & Korsinsky to ensure that the deal price is adequate and whether the directors have breached their fiduciary duties to their shareholders by agreeing to such strict terms. 

The complaint also alleged that the merger agreement guarantees Dainippon an absolute majority even if the company fails to acquire a lion’s share of Sepracor stock. The deal is quite significant for Dainippon as it would enable to company to target the US pharmaceutical market – the biggest in the world. 

Following the deal, Dainippon will be able to access Sepracor’s 1,200 person sales force, which should help support the launch of its antipsychotic drug lurasidone, currently in phase III development. Once launched, lurasidone will be competing with schizophrenia drugs such as AstraZeneca’s (AZN - Analyst Report) Seroquel, Schering-Plough’s (SGP) Saphris, Eli Lilly’s (LLY - Analyst Report) Zyprexa and Bristol-Myers’ (BMY - Analyst Report) Abilify, among others. 

In addition, Sepracor will bring with it several marketed products such as Lunesta, Xopenex/HFA, Brovana, Omnaris and Alvesco. Sepracor has interesting mid-stage pipeline candidates targeting the therapeutic area of central nervous system (CNS), which should contribute to Dainippon revenues from 2012.

Read the full analyst report on SEPR

Read the full analyst report on AZN

Read the full analyst report on SGP

Read the full analyst report on LLY

Read the full analyst report on BMY