Hospira Extends Javelin Offer – Analyst Blog

Recently, Hospira (HSP) extended its tender offer for acquiring Javelin Pharmaceuticals (JAV). The offer, which was supposed to expire on May 18, has been extended till June 2, 2010 as all the conditions of the deal have not yet been met. Viewing the uncertainty surrounding the closure of the deal, shares of Javelin Pharma plunged subsequent to the announcement.

 

In April 2010, Hospira announced its intention to acquire Javelin for $2.20 per share or approximately $145 million. If the deal with Hospira does not get through, it will be a major setback for Javelin. In December 2009, Myriad Pharmaceuticals (MYRX) had decided to acquire Javelin in a stock-swap deal. However, Javelin decided to terminate this agreement in April 2010. The termination has resulted in Javelin paying $4.4 million to Myriad in the form of a termination fee and other expenses incurred by Myriad related to the merger.

 

To meet these expenses and repay its outstanding debt burden, Javelin has agreed to take a loan from Hospira under which the former may borrow funds up to $4.5 million prior to closing of the merger.

 

The acquisition of Javelin will provide Hospira access to Javelin’s lead product candidate, Dyloject, a post-operative pain management drug. The drug is awaiting approval from the US Food and Drug Administration (FDA). A final decision is expected by October 3, 2010.

 

As a non-opioid analgesic, Dyloject scores over traditional intravenous opioids, which are associated with significant adverse events in pain management. Hospira will gain global rights to Dyloject except Europe, where rights are licensed to a third party.

 

Hospira plans to market the product in the US, Canada, Latin America and the Asia-Pacific region, where it also markets Precedex, Hospira’s proprietary sedation agent. Since both Precedex and Dyloject are marketed to anesthesiologists, Hospira will be able to leverage its Precedex sales force to promote Dyloject.

 

We believe Dyloject, on successful commercialization, will be a good addition to Hospira’s product portfolio and help boost revenues. We are currently Neutral on Hospira.