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Mylan to Buy Drug Maker

The $3.37-billion deal would expand its sales force to market a new hypertension treatment.

July 27, 2004|From Reuters

Mylan Laboratories Inc., one of the world's biggest makers of generic drugs, has agreed to acquire King Pharmaceuticals Inc. for about $3.37 billion in stock to expand its branded drug business, the companies said Monday.

The transaction was not welcomed by Mylan's shareholders, who sent the company's shares down more than 16% amid concern that King is not worth the price.

King's most important product is Altace, a drug for hypertension that generates annual sales of about $450 million. Mylan hopes to use the Altace sales force to help market a new hypertension drug of its own called nebivolol, which is being reviewed by the Food and Drug Administration.

But some analysts said nebivolol might not be successful enough to justify spending so much on a sales force. And King's other products, such as the muscle relaxant Skelaxin, may face generic competition within the next two years.

The agreement initially valued King at $4 billion, based on Mylan's closing stock price Friday. But the drop in Mylan's share price slashed the value of the deal to about $3.37 billion.

Shares of Mylan were down $3 to $15.51 on the New York Stock Exchange. King shares jumped 24% to $12.89, up $2.52, also on the NYSE.

King has been struggling to maintain earnings growth and faces a Securities and Exchange Commission investigation into its pricing practices.

For the 12 months ended March 31, Mylan and King combined had about $3 billion in revenue and about $650 million in operating cash flow. They had a combined workforce of nearly 6,000 and a sales force of almost 1,400.

King shareholders will get 0.9 share of Mylan for each King share held.

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