Cephalon up 28% on Valeant bid

Shares in pharmaceutical company Cephalon soared 28 per cent Wednesday in the first regular trading since rival Mississauga-based Valeant Pharmaceuticals International made its $73 US per share takeover offer public on Tuesday.

Frazer, Pa.-based Cephalon's stock rose above Valeant's bid to close at $75.44, a gain of $16.69, suggesting that some investors believe the company is worth more.

Valeant shares rose $5.24, or 12 per cent, to $48.54 on the TSX.

The hostile $5.7 billion US bid followed several attempts to negotiate a friendly deal.

Valeant said it would consider raising its bid if the U.S.-based company will open its books to the Canadian drugmaker.

"If Cephalon's board and management team provides us with the opportunity to do some due diligence, we would be open to sharing a piece of the upside with Cephalon shareholders and give a bump to our offer," Valeant CEO Michael Pearson said on a conference call to discuss the takeover plans.

"We have also made it clear that we will remain disciplined on any final offer price and we will not pursue this transaction at any cost."

Cephalon to respond next week

Cephalon said in a statement that its board of directors would be meeting next week to consider the proposals and would give a response then.

Valeant faces several hurdles as it attempts to convince shareholders that the deal is compelling, including a defensive strategy invoked by Cephalon's board that would not allow stockholders to accept an offer without the board's approval.

Cephalon researches and develops drugs to treat central nervous system disorders, pain, cancers and inflammatory disease. Valeant is increasingly focusing on neurology and dermatology drugs.

The bid came a day after Cephalon announced its own takeover bid for ChemGenex Pharmaceuticals, which is based Melbourne, Australia, in an offer valued at $231 million US.

Valeant also announced its intention to try to replace Cephalon's current board with its own slate of directors.

Last September, Valeant merged with Biovail Corporation, Canada's biggest pharmaceutical company at the time, in a deal valued at $3.2 billion US.