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What a year so far for biotech stock profits…
Another consolidation in the active biotech sector came Tuesday when Cadence Pharmaceuticals Inc. (Nasdaq: CADX) agreed to be acquired by Mallinckrodt plc (NYSE: MNK) in a $1.3 billion deal. The move sent CADX up 26%.
Under terms of the deal, Dublin, Ireland-based Mallinckrodt will pay $14 in cash for each share of San Diego, Calif.-headquartered Cadence. That's a 26% premium to Monday's closing price and a 32% premium to the stock's average 30-day trading price.
Recognizing the natural fit and potential, both companies are moving quickly. The deal is expected to close next month.
Mallinckrodt expects the tie-up to boost its bottom line during the current fiscal year and to be significantly accretive to its 2015 fiscal year's adjusted earnings. Meanwhile, Cadence believes the deal provides shareholders "with a strong return on their investment."
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What Prompted the Cadence Pharmaceuticals (Nasdaq: CADX) Deal
What will give Mallinckrodt's earnings a strong boost is Cadence's "high growth" pain drug Ofirmev.
Ofirmev is a proprietary intravenous formulation of acetaminophen used in the management of pain and fever mitigation. Targeted at anesthesiologists, surgeons, emergency physicians, internists, obstetricians, and other hospital physicians, Ofirmev is administered by injection in a hospital-like setting.
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The drug has a wide distribution and is covered by some 2,350 hospital in the United States. Ofirmev had been used to treat roughly 7 million patients since its debut in January 2011. Additionally, a "new drug submission" for the product has recently been approved by Health Canada.
Just last month, Cadence said it anticipates to book net revenue of roughly $111 million for Ofirmev for the full year of 2013, up from $50 million in 2012.
The lucrative drug will nicely complement Mallinckrodt's Specialty Pharmaceuticals segment. Moreover, it adds another potential growth dimension for the Irish pharmaceutical company as it looks for ways to expand its reach and presence.
Mallinckrodt is "well positioned to further accelerate the trajectory of Ofirmev and realize the full value of this product in the marketplace," according to Cadence.
In an all-around nod of approval from shareholders, both stocks posted double-digit percentage gains following the announcement.
Mallinckrodt's stock moved up 12% to $67.44, also on robust volume. Some 5.2 million shares changed hands versus the daily average of 828,000.
Cadence (Nasdaq: CADX) stock surged 26.47% to $14 (the tender price) on extremely heavy volume of 78 million shares, compared to the average daily volume of 807,000. The company has a market cap of $1.2 billion. Insiders own 33% and institutions hold 56%.
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- Cadence Pharmaceuticals: