Mylan Labs to buy King Pharmaceuticals

Mylan Laboratories said on Monday it agreed to acquire troubled drugmaker King Pharmaceuticals Inc. for about $4 billion, adding patent-protected brand drugs to Mylan’s generic-drug offerings.

Under the terms of the deal, King shareholders will get 0.9 of a Mylan share for each King share held.

The deal values King at about $16.66 per share, a 61 percent premium to King’s closing stock price of $10.37 on Friday.

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King shares are trading near a 15-month low, and are well off a July 2001 high of $46.05, in part because of a Securities and Exchange Commission investigation into King’s pricing practices and flagging demand for some of its top drugs, namely Altace for blood pressure and Levoxyl for thyroid disorder.

In May, King reported quarterly earnings that badly missed analysts’ expectations and said its earnings for the year would be lower than expected, as overstocked wholesalers reduced purchases of King’s drugs.

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Mylan, one of the pioneers of the generic drug industry in the 1960s, has maintained steady growth over the past few years. But long-term growth for generic drug companies is always somewhat limited because of the slew of cheap competitors they often face on drugs losing patent protection.

For the twelve months ended March 31, 2004, the combined company would have had about $3 billion in revenues, about $650 million in operating cash flow and nearly 6,000 employees, with a combined sales force of almost 1,400 representatives.

That salesforce will help market Mylan’s new hypertension treatment, known as nebivolol, if it gets approval from U.S regulators.