Deerfield's Ovation Pharmaceuticals sold to Danish firm

H. Lundbeck A/S had the biggest gain in almost four months in Copenhagen trading after the Danish drugmaker agreed to buy Deerfield-based Ovation Pharmaceuticals Inc. for as much as $900 million, gaining a foothold in the U.S.

Lundbeck will pay $600 million initially and up to $300 million more within a year of completion, depending on U.S. approval of the anti-seizure drug Sabril, the Copenhagen-based company said in a statement today. The acquisition, Lundbeck's biggest, was approved by the boards of both companies and may contribute to net income next year. The company needs to replace revenue it may lose when patent protection for its Cipralex antidepressant, called Lexapro in the U.S., expires.

"The purchase fits Lundbeck's central nervous diseases expertise, and will provide both products and pipeline," said John Reeve, a London-based analyst at Standard & Poor's, in a note to clients. "Importantly, it will provide Lundbeck with marketing infrastructure, ahead of possible U.S. launches" of the experimental Serdolect drug to treat schizophrenia and an antidepressant known as 21004, he said.

Ovation was founded nine years ago, with a focus on orphan drugs and niche markets overlooked by bigger pharmaceutical companies. It sells Xenazine to treat a complication of Huntington's disease, Tranxene for anxiety disorders and Cogentin for people with Parkinson's disease.

Ovation estimates sales of $204 million and operating profit of $32 million for 2008. It expects to start selling Sabril to treat adult epileptic seizures and children with so-called infantile spasms in the U.S. this year, after a panel of Food and Drug Administration advisers recommended approval last month.

Ovation also has rights to sell an intravenous therapy known as ATryn, a blood-clot prevention that is purified from the milk of goats whose parents were injected with a human protein developed by GTC Biotherapeutics Inc.

Lundbeck retained Deutsche Bank AG as financial adviser and Morgan, Lewis & Bockius for legal advice. Goldman Sachs Group Inc. advised Ovation, who also used Kirkland & Ellis LLP and Katten Muchin Rosenman LLP for legal advice.