Shares of Ista Pharmaceuticals Inc. rose higher than the $327-million hostile bid by Valeant Pharmaceuticals International Inc. of Canada, indicating that investors expect more.
The Irvine eye medications maker's stock climbed $2.79, or 71.7%, to $6.68 on Friday, more than the $6.50 a share offered by Valeant. The surge was the most since Ista became publicly traded in August 2000.
Valeant, which has announced 10 acquisitions this year, made its bid public Friday after Ista rebuffed three approaches, the Ontario, Canada, company said in a statement. The price includes debt.
Ista again rejected the offer, calling it "grossly inadequate," and said the company would explore strategic options. Valeant said the offer might be raised if Ista allowed the company to conduct due diligence, revealing a reason to pay more.
"It's not surprising that Valeant saw Ista as a great target," said Corey Davis, an analyst with Jefferies & Co. in New York. "But equally not as surprising why Ista management wasn't interested in $6.50, if they can really hit their 2013 target revenue of $300 million."
Davis estimated that Valeant might pay as much as $8 a share if due diligence was allowed.
Valeant, which has been building its dermatology business this year with acquisitions of units from Johnson & Johnson and Sanofi, also wants to expand in ophthalmology, Chief Executive Mike Pearson said. Adding Ista would boost Valeant's annual eye-medication U.S. sales to more than $200 million from less than $50 million now, he said.
"This will create a new growth platform for us," Pearson said. "Our preferred approach is obviously not to have this type of transaction where we have to go hostile, but we do think it's in shareholders' best interest to hear directly from us."
The bid is 67% higher than Ista's $3.89 closing price Thursday.
Valeant shares rose 47 cents, or 1.1%, to $45.33 on Friday.
Valeant approached Ista on Oct. 5 and made a written proposal at the end of November, before affirming the offer Monday, the company said. Ista declined to engage in discussions and rejected the bid Wednesday, according to the statement.
Shares of Ista, which sells Istalol for intraocular pressure and Bromday for problems associated with cataract extraction, had fallen 24% this year before Friday. The company reported in July that a late-stage trial showed its experimental drug Remura didn't fight dry eyes better than a placebo.