Cephalon rejects Valeant bid

Cephalon's board of directors has formally rejected Valeant Pharmaceuticals' unsolicited bid to acquire the biotech company for $5.7bn or $73 per share, a 29 per cent premium on the company's 30-day trading average.

"The Cephalon Board believes that your proposed price significantly undervalues Cephalon, its key assets and its prospects," Cephalon CEO Kevin Buchi said in an open letter to Valeant CEO J Michael Pearson.

"From the standpoint of the Cephalon shareholder, a transaction with Valeant at this time and at the price you proposed would mean foregoing the greater value obtainable from Cephalon's strategic plan, including the value inherent in our diversified and robust portfolio of marketed and pipeline products."

The board said that Valeant's bid, which was made public last week, used a "worst-case scenario" to determine Cephalon's value and that the valuation neglects the 10 late-stage products in Cephalon's pipeline. The pipeline includes six drug candidates that the company believes have blockbuster potential and that it expects it will begin to launch within the next three years.

Meanwhile, Valeant said it would begin a push to install its own directors to Cephalon's board, nominating former Quintiles president Santo J Costa, former CalPERS interim CEO Richard H Koppes, former Coventry Health Care CEO Lawrence N Kugelman, Media AB Group president and CEO Anders Lonner, former Harvard business school dean John H McArthur, and former Duke University business school dean Blair H Sheppard.

"We stand ready to quickly commence and close our transaction as proposed, unless Cephalon stockholders do not support our offer, in which case we will focus our attention on other opportunities to invest our capital," Pearson said in a statement.