3/30/11 Update

CEO Michael Pearson of Canadian based Valeant (VRX) reiterated his determination(live on CNBC this am) for buying Cephalon (CEPH) after being stalled by the Board of CEPH after initial discussions.Mr. Pearson stated he wanted to move quickly and if the deal stalls he would withdraw his bid for the Company.It is possible that the Board of Cephalon would put up the sale of the Company in an auction but 30 days would be a time constraint so alternatives to the Valeant bid are unlikely.Mr Pearson stated that he had lined up debt financing for the$73/sh. offer of $5.7B  said to be provided by Goldman-Sachs. Valeant was formed through the merger of Valeant and Biovail and has grown through a  strategy of acquisition with 20 completed.

Both CEPH and VRX are primarily owned by institutions. Cephalon has substantial cash flow from operations and over $1B of cash on its balance sheet. Synergies would come from cost cutting such as R&D and SGA at Cephalon which are over $1b a year.

The market cap of Cephalon is $5.7B and Valeant is $14.9B. CEPH had 14.3 shares short interest out of 75.7 shares outstanding. Options for April and May calls on CEPH were active over the past month.

This deal is likely to boost biotech and drug stocks which are already assuming M&A drivers.

Cephalon one of the major biopharma picks in the Rayno Life Science  Portfolio was up 27% on a bid from Valeant Pharmaceuticals for $73 per share in cash. Shares are now trading $2 over offer price.

Raygent » Rayno Biopharmaceutical Portfolio 2011 Up 1.75% Today

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