ProStrakan's shares spike as takeover battle looms

A TAKEOVER battle loomed last night for ProStrakan after the Borders-based drugs developer revealed it was considering offers for the business.

The pharmaceuticals firm said it had already rejected a takeover approach from Dutch peer Norgine, which last week bought a 12.6 per cent stake in the Scots group.

ProStrakan claimed that Norgine's undisclosed offer price had "undervalued" the company and its prospects.

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The Galashiels-based firm said: "The board confirms that there have also been other expressions of interest both in the company and its assets, which the board is beginning to evaluate."

Shares in the company closed up 2.7 per cent or 2.5p last night at 95p, valuing the firm at about 186 million. The stock had risen as high as 100p earlier in the day.

Analysts at Execution Noble said an offer above 120p would be credible, given the company's "solid" distribution business in the European Union.

But analyst Chirag Talati added: "Our initial view is that an offer price in north of 120p is easily justifiable, though we also caution that in absence of its debt refinancing, ProStrakan is not in a situation to demand a substantial premium."

The drugs firm yesterday declined to comment on speculation over a possible offer price.

Last week, privately-owned Norgine pledged not to launch a hostile bid for the firm for at least six months.

The spectre of a takeover battle comes after Wilson Totten, ProStrakan's chief executive, resigned in September following the company issuing a profits warning caused by delays in its product pipeline.

A contractor's factory was forced into a temporary closure to upgrade its facilities, holding up supplies of Sancuso, the anti-sickness patch, to the key US market. Then the US Food and Drug Administration announced that a review of Abstral, a treatment for pain in cancer patients, would not be complete until the year end.

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In a trading update, ProStrakan yesterday said revenues for the first ten months of the year had risen by 20 per cent year-on-year to 76.8m.

It added that it planned to re-commence distribution of Sancuso early in the first quarter of 2011 following the shut down of its contractor's factory.

Peter Allen, chairman and acting chief executive, said: "The past few months have been interesting and challenging.

"We fully expect the manufacturing issues with Sancuso and the approval of Abstral in the US will be concluded this year so revenues from both products will start early in the New Year."

He said the company was also looking at a range of options to refinance its debt, with repayments of 1m each month due to start in December, with the outstanding balance becoming fully repayable at the end of February 2012.

Execution Noble said the company's total debt was around 46.5m, adding refinancing was "critical" as the cash situation is getting "too close for comfort".