Irish drugmaker Elan Corp. Plc has sued King Pharmaceuticals Inc. to stop it from backing out of an agreement to pay $850 million for US rights to two Elan medicines.
King said on Friday it was reviewing the deal after the US Federal Trade Commission disclosed it was investigating whether Elan unfairly blocked generic competition for one of the drugs, the muscle relaxant Skelaxin.
King, based in Bristol, Tennessee, agreed on January 30th to acquire US and Puerto Rican rights to Skelaxin and Elan's sleep aid Sonata. The deal was subject to approval of Elan shareholders, who were scheduled to meet tomorrow.
Elan said it believes it has satisfied all conditions necessary for closing the deal.
Its shares fell more than 7 per cent today after tumbling 33 per cent on Friday amid worries the potential collapse of the deal could hurt its ability to pay off its heavy debt load. Elan has about $2.8 billion in debt obligations to be paid off by 2008.
"King Pharmaceutical has made a number of public statements that call into question its willingness to complete the transaction in accordance with its agreement," said Elan President and Chief Executive Mr G. Kelly Martin in a statement announcing the lawsuit. "Any refusal by King to close the transaction in accordance with its agreement has no basis and is unjustified."
Elan filed the suit against King in New York State Supreme Court.
King said it was surprised by the legal move, calling it "disappointing" and "premature".
"We never suggested that we were not willing to honor our obligation. We never made any statement like that," said Mr James Green, King's vice president for corporate affairs.
Shares of Elan closed down 19 cents at $2.33 on the New York Stock Exchange.King Pharmaceuticals rose 50 cents, or 4.5 per cent, to $11.61, also on the NYSE.