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Valeant to be disciplined in Cephalon bid: CEO

Valeant Pharmaceuticals International Inc. (VRX-T) is not interested in a bidding war for U.S. drugmaker Cephalon Inc. (CEPH-Q), and Chief Executive Michael Pearson said today he was willing to walk away.

But Pearson also said Valeant may consider raising its offer if Cephalon opens up its books and the deal looks right.

"While we are willing to consider a higher price if due diligence supports this, we will remain very disciplined on price," he said on a conference call with analysts today.

Mississauga, Ontario-based Valeant offered a $73 US per share for Cephalon after the market closed on Tuesday, aiming at a cash-rich company that would expand its current offering into cancer drugs and other fields. It said it would take the offer directly to the Cephalon shareholders.

Analysts say the deal would help Valeant, which specializes in branded generics, dermatology and neurology treatments, and the Valeant stock rose 11 percent.

Cephalon has strong cash flow, a growing cancer drug in Treanda and several other products, including a branded generics business that would fit in Valeant's operations, and a promising pipeline of drugs in development.

Valeant, formed when Canada's Biovail bought U.S.-based Valeant in September for $3.3 billion and took its name, also said it planned to propose replacing Cephalon's board with its own nominees.
Cephalon said it would respond to Valeant's proposal next week.

Pearson said he was willing to look for other ways to invest Valeant capital if he failed to win over Cephalon's stockholders.

"Winning does not mean buying Cephalon. If someone wants to pay more, they're welcome to do so," Pearson said.

Jefferies analyst Corey Davis said the bid was a major surprise, and Cephalon shareholders were not likely to get a better deal elsewhere.

"We are hard pressed to recommend not taking the deal since we had trouble seeing how the stock could get that high in the near future," he wrote in a note.

"It is difficult for us to envision any company willing to be as aggressive as Valeant in cutting the costs and hence any would-be white knight would need to place tremendous value on the pipeline," he said.

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