NEW YORK — King Pharmaceuticals Inc. is dropping its $850 million deal with Elan Corp. PLC to acquire rights to two drugs.
The decision was made after the government began an investigation into the ways Elan blocked generics competition on one of its medicines.
King says it is not proceeding with the acquisition due to “various breaches and misrepresentations by Elan.”
Elan, based in Dublin, has filed a lawsuit against King to keep the deal.
A trial in New York State Supreme Court is scheduled to begin May 15.
Under the deal King was to acquire the U.S. rights to muscle relaxant Skelaxin, the subject of the Federal Trade Commission investigation, as well as Sonata, a sleep aid.
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King specializes in acquiring medicines that generate modest revenue and then boosting sales through intense marketing.
The company, which makes Altace for hypertension and Levoxyl for thyroid disorders, has only a small research budget for new drug development.
If King wins the court case, it might take the money set aside for the Elan deal and instead buy the rights to drugs from other companies.
“Assuming they are able to get their $850 million back, I think it’s a positive because it gives them a second chance to enhance their pipeline of drugs,” notes analyst Jonathan Moran of SG Cowen Securities.
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