Global Insight Perspective | |
Significance | King Pharmaceuticals' tender offer for Alpharma is closing today after the Federal Trade Commission (FTC) approved the acquisition with the sole requirement that King divests some assets related to Alpharma's pain-killer Kadian. |
Implications | Considering that Kadian patent protection expires in 2010, the requirement to divest assets related to this drug is not a particularly onerous requirement for King. |
Outlook | The Alpharma acquisition—even without certain Kadian-related assets—would provide a significant boost to King's pain drugs portfolio. Alpharma's Flector pain patch and abuse-resistant pain treatments in-licensed from Acura (U.S.), along with King's own T-62, represent particularly promising opportunities for the newly-expanded company. |
King to Close the Deal Following FTC's Blessing
King Pharmaceuticals is due to close its tender offer for Alpharma today after the FTC allowed the acquisition to proceed on one condition. King is to divest certain assets related to Alpharma's best-selling drug Kadian (morphine sulphate extended-release) after closing the acquisition of Alpharma, according to the FTC's provisional acceptance of the deal.
With more than 92% of Alpharma shares tendered, according to the Associated Press, the acquisition is now expected to be completed without delay.
New Pain Treatment Developments to Boost King's Portfolio
The requirement to divest Kadian assets has been driven by the regulator's concerns over potential dominance of the pain products market in the United States by the merged company. In addition to Kadian, Alpharma has a pain patch product Flector which was launched last January. King itself is developing an extended-relieve pain-killer called Remoxy in collaboration with Pain Therapeutics (U.S.). Remoxy is a form of oxycodone, an opioid pain-reliever which is designed to reduce the risk of abuse.
In addition, King is co-developing other pain relievers designed to make it more difficult for people to abuse them. Under a 2007 agreement, King has so far exercised licensing options for three such compounds with Palatine, Illinois-based Acura Pharmaceuticals. The company announced last week that it has decided to license a fourth such compound from Acura. Under the latest licensing deal, Acura is to receive US$3 million in exchange for the U.S., Canada and Mexico rights for this immediate-release opioid analgesic compound.
Separately, King is developing neuropathic pain treatments. Last Friday (26 December), the company announced that it has initiated a Phase II clinical trial programme with T-62 in oral formulation. T-62, an investigational adenosine A1 allosteric enhancer, will be evaluated in two doses against placebo as a treatment for neuropathic pain in a trial involving 130 patients in up to 20 study centres.
Outlook and Implications
The divestment of Kadian seems a significant concession to make considering that it is currently Alpharma's highest-selling product with 2007 sales of US$167.7 million. However, most patents related to Kadian are expected to expire in the first half of 2010, leaving the product exposed to generic competition. In addition, King is well on its way to finding a Kadian revenue replacement, assuming Remoxy development is successfully completed.
Overall, King's dependence on pain relievers is expected to grow considering the patent threats facing its muscle relaxant Skelaxin and the patent and competitive threats facing the company's anti-thrombotic Thrombin-JMI.
Going forward, King's strategy will be to focus on the development of abuse-resistant pain-relievers, such as the compounds in-licensed from Acura, and the progression of T-62 through clinical trials. The increased focus on pain products at the expense of other therapeutic areas could, however, prove a costly error for the company. King is likely to make targeted product acquisitions in the coming months to diversify its portfolio. However, the high cost of the Alpharma acquisition could undermine the company's ability to invest in additional product in the short term.