Mallinckrodt Adds New Drugs With $1.2 Billion Sucampo Deal

(Bloomberg) -- Mallinckrodt Plc agreed to buy Sucampo Pharmaceuticals Inc. for about $1.2 billion in cash to add a treatment for constipation and experimental medicines targeting rare diseases, helping diversify its business away from the controversial drug that makes up the largest part of its revenue.

Mallinckrodt will begin a tender offer at $18 a share, the companies said in a statement Tuesday. Bloomberg News reported Dec. 7 that Rockville, Maryland-based Sucampo was reviewing options including a sale of the business after receiving takeover interest. The purchase price is 89 percent above the stock’s recent low point on Oct. 30.

Sucampo shares rose 5.3 percent to $17.90 at 9:45 a.m. in New York. Mallinckrodt was up 3.9 percent to $24.23.

Mallinckrodt Adds New Drugs With $1.2 Billion Sucampo Deal

Mallinckrodt has faced major setbacks in recent months, and is seeking to lessen its reliance on two products that together account for more than half of total sales: Acthar, a drug for autoimmune and rare diseases that has drawn controversy over its high price, and INOmax, an infant-respiratory treatment that lost a court ruling in September and could face generic versions. Mallinckrodt’s own generic-drugs business has suffered from pricing pressure, and, along with makers of opioids, the drugmaker is being probed by the government as part of an industrywide crackdown.

Shares of Mallinckrodt were down 53 percent this year as of Friday’s close, the worst-performing stock on the Standard & Poor’s 400 health-care index.

Sucampo sells Amitiza, a drug for chronic constipation and irritable bowel syndrome. The company has a licensing and collaboration agreement with Takeda Pharmaceutical Co. for Amitiza in countries including the U.S. and Canada, according to the company’s website. It also has two drugs in late-stage clinical trials for rare diseases.

The company was founded by Ryuji Ueno and Sachiko Kuno, who remain controlling shareholders with a combined stake of more than 30 percent. The company has grown organically and through deals including the purchase this year of rare disease business Vtesse for about $200 million.

Deutsche Bank AG advised Mallinckrodt on the purchase, while Wachtell, Lipton, Rosen & Katz provided legal advice. Jefferies LLC served as Sucampo’s financial adviser and Cooley LLP was legal adviser.

Holders with about 32 percent of Sucampo’s shares have agreed to tender their shares in the offer. Mallinckrodt expects the acquisition to add to adjusted diluted earnings per share by least 30 cents in 2018 and at least double that amount in 2019, assuming a first-quarter 2018 close.

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