Cephalon, Inc. announced that its wholly-owned subsidiary Cephalon Australia Pty. Limited, intends to make a takeover bid for SIRTeX Medical Limited. SIRTeX markets SIR-Spheres, a product approved in the United States, Europe, Australia and portions of Asia for the treatment of liver cancer.
Under its bid, Cephalon Australia intends to offer A$4.85 cash for each SIRTeX ordinary share including any SIRTeX shares that are issued on the exercise of SIRTeX options. The total bid value is approximately US$161 million on a fully-diluted basis. The offer represents a 13.5 per cent premium to SIRTeX's 90-day volume weighted average price and a 2.1 per cent premium to the closing price on February 10, 2003 (being the date before SIRTeX requested a trading halt pending the release of this announcement). Cephalon intends to fund the bid price using a portion of its existing cash balance.
The SIRTeX board of directors also announced that it intends to recommend acceptance of the Cephalon Australia bid to its shareholders. Dr. Bruce Gray, SIRTeX's executive chairman and president and largest shareholder, has signed an agreement that provides Cephalon Australia with an option to acquire shares from Dr. Gray representing up to 19.9 per cent of the total issued share capital of SIRTeX at a price of A$4.85 per SIRTeX share.
Cephalon's chairman and chief executive officer, Frank Baldino, Jr., PhD, said that Cephalon considers the SIRTeX bid to be fair, and if successful, SIRTeX will become part of a profitable, international biopharmaceutical company. Dr. Baldino added that Cephalon is committed to investing in and continuing SIRTeX's operations in Australia, including transitioning SIRTeX employees to Cephalon Australia.
"We feel that SIRTeX is a perfect fit for Cephalon's growth strategy," Dr. Baldino said. "SIR-Spheres is a novel, innovative oncology treatment that is approved for use in the United States, Europe, Australia and portions of Asia. SIR-Spheres is at the beginning of its growth cycle. With Cephalon's infrastructure, resources and proven marketing ability, we believe we will be able to drive this product to its full commercial and therapeutic potential."
SIR-Spheres was approved for marketing in the United States in March 2002 for treatment of unresectable metastatic liver tumors from primary colorectal cancer with adjuvant intra-hepatic artery chemotherapy. The U.S. incidence of new cases of metastatic liver cancer is more than 50,000 annually.
SIR-Spheres deliver a high radiation dose to tumors within the liver regardless of their cell of origin, number, size or location. The procedure uses biocompatible radioactive microspheres that contain yttrium-90 and emit high-energy beta radiation. The microspheres are implanted using a catheter placed in the hepatic artery feeding the liver and are trapped in the small blood vessels of the tumors. Commonly reported side effects of SIR-Spheres include fever, abdominal pain, nausea, vomiting, diarrhea and mild to moderate elevation of LFTs.
Clinical studies supporting the product's U.S. approval showed an improvement in median time to first progressive disease in the liver from 7.8 months to 12.0 months (p = 0.05) for patients with advanced, unresectable colorectal liver metastases receiving SIR-Spheres and floxuridine (FUDR) vs FUDR alone. A post-approval clinical trial, presented at American Society of Clinical Oncology (May, 2002) compared systemic fluorouracil/leucovorin (5 FU/LV) chemotherapy versus the same chemotherapy plus a single administration of SIR-Spheres in patients with advanced colorectal liver metastases. A statistically significant (p < 0.001) improvement in time to progressive disease from 3.4 months to 15.6 months favoring the group receiving SIR-Spheres was shown. This study also showed that the SIR-Spheres and chemotherapy group had a median survival of 27.1 months compared to 12.8 months in the chemotherapy alone group (p = 0.03).
SIRTeX's board of directors engaged a U.S.-based financial consultant to explore options to maximize shareholder values. Based on the outcome of this process, the SIRTeX directors believe Cephalon Australia's bid represents the most attractive outcome for SIRTeX shareholders.
Dr. Gray, the founder of SIRTeX, said: "SIRTeX requires significant additional resources to enable SIR-Spheres to be accessible to the tens of thousands of cancer patients worldwide whom we believe can benefit from this treatment. Cephalon has the resources and experience to make this goal a reality and is an ideal partner for us."
Cephalon's guidance is that SIR-Spheres sales revenue for 2003 will be approximately US$10-$12 million. Cephalon expects to make substantial investments in SIR-Spheres manufacturing and commercialization to drive rapid growth of SIR-Spheres beginning in early 2005. Cephalon's previously stated 2003 earnings guidance of approximately US$1.50 per share (fully diluted) remains unchanged.
SIRTeX has entered into a Pre-Bid Agreement with Cephalon under which, among other things, SIRTeX has agreed to compensate Cephalon for reasonable costs, expenses and losses that it incurs in connection with the bid, if unsuccessful, up to a maximum of approximately A$2.7 million. Cephalon's bid for SIRTeX shares also will be subject to a number of conditions that will be identified to SIRTeX shareholders.