Mallinckrodt expands pain portfolio with Cadence acquisition

When medical device maker Covidien ($COV) shed its pharmaceutical unit last spring, it predicted the spinoff, Ireland-based Mallinckrodt ($MNK), would embark on an aggressive growth strategy that would boost revenues as much as 11% a year. Today Mallinckrodt took a major step toward hitting that goal by announcing it would acquire Cadence Pharmaceuticals ($CADX) for $1.3 billion, or $14 a share--a 26% premium over Cadence's closing price yesterday.

Cadence's pain drug, Ofirmev, was the sweetener behind this deal. San Diego-based Cadence won approval for Ofirmev--an IV formulation of acetaminophen marketed to hospitals--in 2010 and has since established an impressive footprint for the drug. Ofirmev is currently used in 2,350 U.S. hospitals, and sales have grown from $50.1 million in 2012 to an expected $110.5 million in 2013, according to a press release announcing the deal.

"Ofirmev's growth is driven by an expanding base of physicians who are prescribing the product for an increasing number of surgical patients," said Mallinckrodt CEO Mark Trudeau in the statement. "We have been impressed with the strong relationships that Cadence's commercial organizations have established with customers in the hospital channel and are excited by the opportunity to build on these relationships to expand our platform in this area."

Mallinckrodt has a strong stable of pain drugs, including Exalgo to treat severe chronic pain and Pennsaid, a topical drug to relieve knee pain. The company is awaiting the FDA's verdict on Xartemis, a drug it developed with Depomed ($DEPO) to treat pain after bunion surgery. Mallinckrodt announced positive Phase III trial results on Xartemis (previously known as MNK-795) in September.

On February 7, Mallinckrodt reported sales of $540 million for its first fiscal quarter of 2014, ending in December, and earnings per share of 88 cents--far above analysts' estimates of 67 cents. Investors seem to like the company's prospects, pushing shares up more than 2% since the earnings announcement to $59.31 and then another 5% to $62.52 in premarket trading today.

- here's the press release
- read more at Bloomberg