Cephalon has rejected Valeant Pharmaceuticals International's hostile takeover bid, saying that the $5.70 billon offer, or $73.00 per share, is inadequate and not in the best interests of shareholders.

Valeant made its approach last month and Cephalon said it needed time to carry out a thorough review. It now says that the bid significantly undervalues the company's "diversified and robust portfolio of marketed and pipeline products".

The company goes on to say that "by Valeant's own admission, its analysis of Cephalon's value is based on a worst-case scenario, which is an inappropriate methodology". It argues that the timing of the offer is opportunistic as the 30-day average Cephalon share price of $56.74 on which Valeant based their proposal is near the stock's 52-week low and "represents virtually no premium" to its 52-week high.

Cephalon goes on to talk about having "one of the broadest pipelines in the industry, with 10 late-stage product candidates targeted at novel and 'best-in-class' therapeutics". This includes six indications "with blockbuster potential which are projected to begin launching in the next three years" and these programmes "represent tremendous value that is not reflected in Valeant's current proposal".

Valeant may rise price after a look at the books

Valeant chief executive Michael Pearson responded by saying that "while we are disappointed with the response from Cephalon's board, we remain committed to our process". This includes "trying to find a modest amount of additional value if Cephalon engages with us and allows us to conduct due diligence, which we believe would take only 2-3 weeks".

He went on to say that Valeant has already recruited "seven experienced candidates" to serve as director-nominees of Cephalon and arranged financing for the deal. Mr Pearson also claimed to have received "positive feedback from many of the largest stockholders of Cephalon" and "we stand ready to quickly commence and close our transaction as proposed, unless Cephalon stockholders do not support our offer, in which case we will focus our attention on other opportunities to invest our capital".

He concluded by saying that it is in the best interests of both firms' stockholders "to resolve this matter quickly, one way or the other. Valeant will move fast. We had hoped that Cephalon would do the same. Now, it will be in the stockholders' hands".