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Mallinckrodt to acquire Questcor Pharmaceuticals for $5.6 billion

DublinTuesday, April 8, 2014, 09:00 Hrs  [IST]

Mallinckrodt plc , a leading global specialty pharmaceuticals company, and Questcor Pharmaceuticals, Inc., a high-growth biopharmaceutical company, have entered into a definitive merger agreement under which Mallinckrodt will acquire Questcor in a transaction valued at approximately $5.6 billion. The transaction was unanimously approved by the boards of directors of both companies. Subject to customary closing conditions, the transaction is currently expected to be completed in the third calendar quarter of 2014.

Under the terms of the transaction, Questcor shareholders will receive $30.00 per share in cash and 0.897 Mallinckrodt shares for each share of Questcor common stock they own, for a total approximate consideration of $86.10 per Questcor share. Following completion of the merger, Mallinckrodt shareholders will own approximately 50.5% and former Questcor shareholders will own approximately 49.5% of the combined company's stock. Based on the closing price of Mallinckrodt and Questcor on April 4, 2014, the total per share consideration represents a premium of approximately 27% per share over Questcor's stock price, and a premium of approximately 33% over Questcor's trailing 20-trading-day volume-weighted average price.

Highlights of Transaction: With transaction, Mallinckrodt is expected to be an increasingly diversified, high-growth specialty pharmaceuticals company with significantly increased scale, revenues, profitability and cash flow, creating a strong platform to deliver sustainable growth and substantial value for shareholders of both companies; Transaction expected to be immediately accretive to Mallinckrodt's fiscal year 2014 adjusted diluted earnings per share; expected to be significantly accretive in fiscal year 2015; With strong cash generation, Mallinckrodt is expected to be well positioned to decrease the combined company's leverage over time;  Questcor's high-growth H.P. Acthar Gel is expected to be a strong complement to Mallinckrodt's broadening growth portfolio of leading specialty pharmaceutical brands, including  Ofirmev, Exalgo and Xartemis XR. Acthar generated net sales for Questcor of $761.3 million in calendar 2013, up 49.6% from calendar 2012;     Acthar is approved by the US Food and Drug Administration (FDA) for 19 indications, many of which are associated with the treatment of autoimmune and inflammatory conditions; Questcor commercial operations will function as a separate business unit within Mallinckrodt's Specialty Pharmaceuticals segment.

Mark Trudeau, president and chief executive officer of Mallinckrodt, said, "We believe this transaction will provide a strong and sustainable platform for future revenue and earnings growth, and provide exceptional value for shareholders of both Mallinckrodt and Questcor. It will substantially increase the scale, diversification, cash flow and profitability of our business, while expanding and enhancing the breadth and depth of our specialty pharmaceutical platform.  With Questcor, combined with our recently completed acquisition of Cadence Pharmaceuticals, the new Mallinckrodt will have a significant, established presence with prescribers, payers and hospitals. We will also have an increasingly diversified specialty pharmaceuticals portfolio, which will include novel therapeutics for pain management, as well as central nervous system, renal, rheumatologic and other autoimmune and inflammatory disorders."

"After significant due diligence, we have concluded that Questcor is another ideal strategic fit with Mallinckrodt," Trudeau continued. "Questcor's expertise and proprietary manufacturing know-how has allowed the company to provide patients with a unique product that addresses some of the most complex and challenging therapeutic areas within specialty medicine. Acthar is increasingly being employed by specialty physicians in the treatment of a range of serious, difficult-to-treat autoimmune and inflammatory conditions, where patients often have exhausted other good therapeutic options. With the exceptional talent and expertise Questcor brings, combined with the financial strength, portfolio breadth and geographic reach of the combined company, we believe we are now well on our way to becoming a leader in the development and commercialization of specialty therapeutics around the world."   

Don M. Bailey, President and Chief Executive Officer of Questcor, said, "This transaction will create substantial value for our shareholders, employees, customers and patients. The cash and equity structure of the merger will allow our shareholders to realize significant and immediate value, and with approximately 49.5% ownership of the combined company our shareholders will also be able to participate in the growth and value creation that we believe the combined company is poised to deliver."

"Like Questcor, Mallinckrodt has significant experience and expertise in managing medicines in highly regulated, complex markets," Bailey continued. "I strongly believe Mallinckrodt is the right partner to support the continued growth of Acthar in the highly specialized markets that we serve. The increased cash flow and scale of operations of a combined Questcor/Mallinckrodt organization will provide an even stronger platform to support the expansion of Acthar into new therapeutic areas. Questcor commercial operations will function as a separate business unit within Mallinckrodt, and given the complementary nature of our businesses and product portfolios we expect this to be a seamless transaction. We look forward to becoming an important part of this exciting new company."   

Questcor's H.P. Acthar Gel (repository corticotropin injection), is an injectable drug  approved by the FDA for the treatment of 19 indications. Of these 19 indications, Questcor currently generates substantially all of its net sales from the following on-label indications: the treatment of proteinuria in the nephrotic syndrome of the idiopathic type, or NS, the treatment of acute exacerbations of multiple sclerosis, or MS, in adults, the treatment of infantile spasms, or IS, in infants and children under two years of age, and the treatment of certain rheumatology related conditions, including the treatment of the rare and closely related neuromuscular disorders dermatomyositis and polymyositis. With respect to nephrotic syndrome, the FDA has approved Acthar to "induce a diuresis or a remission of proteinuria in the nephrotic syndrome without uremia of the idiopathic type or that due to lupus erythematosus." Questcor is also exploring the possibility of developing other on-label indications and the possibility of pursuing FDA approval of additional indications not currently on the Acthar label where there is high unmet medical need.

Licensed from Novartis by Questcor in 2013, Synacthen and Synacthen Depot are available in more than forty countries to treat a number of conditions such as ulcerative colitis, chronic skin conditions responsive to corticosteroids and retrobulbar neuritis. Synacthen and Synacthen Depot are also used as a diagnostic test for adrenal insufficiency. Synacthen and Synacthen Depot are not approved in the US.

Recently acquired through its acquisition of Cadence Pharmaceuticals, Mallinckrodt's product  Ofirmev (acetaminophen) injection (1000 mg / 100 mL, 10 mg / mL; for intravenous use only), is a proprietary intravenous formulation of acetaminophen, and is indicated for the management of mild to moderate pain, the management of moderate to severe pain with adjunctive opioid analgesics and the reduction of fever. The FDA approval of  Ofirmev was based on data from clinical trials in approximately 1,020 adult and 355 paediatric patients. These trials included two studies evaluating the safety and effectiveness of  Ofirmev in the treatment of pain, and one study evaluating  Ofirmev in the treatment of fever. The effectiveness of  Ofirmev for the treatment of acute pain and fever has not been studied in paediatric patients less than two years of age.

Mallinckrodt is a global specialty pharmaceutical and medical imaging business that develops, manufactures, markets and distributes specialty pharmaceutical products and medical imaging agents.

Questcor Pharmaceuticals, Inc. is a biopharmaceutical company focused on the treatment of patients with serious, difficult-to-treat autoimmune and inflammatory disorders.

 
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