Cephalon looks to spend some cash on deals with smaller firms

As funding options dwindle for small pharmaceutical and biotechnology companies, Big Pharma is on the hunt for deals at bargain prices. So are the medium- sized medicine makers.

With almost $2 billion in annual sales, Cephalon Inc. is in the second category. Its executives told analysts on its earnings call Tuesday evening that they’re “actively” looking at potential deals.

Marc Goodman, of Credit Suisse, noted that no initial public offerings are getting done and lots of small companies need cash. He wondered if Cephalon, which had $847 million in cash as of Sept. 30, was looking to part with some of it.

“It’s not just the IPO market being poor,” said Cephalon chairman and CEO Frank Baldino Jr. “The ability to raise money has been increasingly difficult especially in this financial environment we are in.”

Baldino said many companies “simply can’t complete the trials that they have started,” referring to the costly clinical testing required to prove a drug is safe and effective.

“It’s nice that we have such a positive cash-flow business that we can spend that cash on these opportunities,” Baldino said.

Last week, Cephalon agreed to provide $20 million to Watertown, Mass.-based Acusphere Inc., which has been working on a formulation for an injectable version of Pfizer’s pain-reliever Celebrex. That drug would be aimed at the hospital market and compete with a generic drug called Toradol, which generates more than $400 million in annual sales.

Cephalon chief financial officer J. Kevin Buchi said the challenge is sorting through all the “stuff.” Frazer-based Cephalon wants to make sure “the things that we acquire are things that make sense for our business, some things that we think are likely to get approved and have good commercial opportunity.”

Spoken like one of the hunters, rather than the hunted.