Lundbeck makes $658M bid for Chelsea, gaining once-rejected dizziness drug Northera

One day after announcing a drop in quarterly sales and profits, Danish drugmaker Lundbeck said it will pick up Chelsea Therapeutics ($CHTP) for cash and contingent value rights (CVRs) in a deal worth up to $658 million. The offer, made early today, equates to about $7.94 a share and marks a 59% premium over Chelsea's closing price yesterday. The company's shares soared 30% in premarket trading to $6.51.

Northera--Courtesy of Chelsea Therapeutics

Rumors that Chelsea could be in line for a buyout first emerged in mid-March but were considered highly speculative in light of the company's bumpy launch of Northera. After one FDA rejection and a long delay, Northera won FDA approval in February to treat a type of lightheadedness associated with neurological disorders like Parkinson's disease. But some analysts worried that the drug's sales could be hampered by safety issues--a black box on the label warns of dangerous blood-pressure spikes.

Lundbeck has plenty of experience marketing drugs to treat brain disorders, having sold the blockbuster antidepressant Cipralex (escitalopram), which it developed with Forest Laboratories ($FRX). More recently, it launched its own Selincro to treat alcohol dependence in some European countries. And its once-monthly version of the antipsychotic drug Abilify won FDA approval last year.

"Lundbeck's expertise in commercializing rare disorder CNS products will enable a rapid and successful launch of Northera into the U.S. market and ultimately will provide added benefit to patients suffering from [neurogenic orthostatic hypotension]," Chelsea CEO Joseph G. Oliveto said in a statement.

Lundbeck has needed a new hit ever since escitalopram--sold by Forest in the U.S. as Lexapro--lost its stateside patent protection in 2012. Lundbeck's share of Forest's sales slid, and then the drug dropped off patent outside the U.S. Sales plummeted further, forcing the company to cut jobs. On Tuesday, Lundbeck announced that its first-quarter sales dropped 7% from the same period a year ago to 3.6 billion DKK ($670.6 million), and its earnings, excluding certain costs and one-time events, fell 21% to 729 million DKK ($136.2 million).

In the earnings announcement, Lundbeck warned investors that "this year will be a period with an unusual number of variables," including product launches and continued sales erosion due to generic competition. Now, with the addition of Chelsea, the company has another variable to consider--the less-than-certain outlook for Northera.

- here's the statement on the deal
- access Lundbeck's earnings here (PDF)
- read more at Reuters