Cephalon Inc. is digging in Down Under.

The West Chester, Pa.-based firm's wholly owned subsidiary, Cephalon Australia Pty. Ltd., intends to make a US$161 million takeover bid for SIRTeX Medical Ltd., a company that has marketed in a limited capacity a liver cancer treatment approved in much of the world.

Cephalon Australia intends to offer A$4.85 (US$2.85) cash for each SIRTeX ordinary share, including any shares issued on the exercise of SIRTeX options - a 13.5 percent premium to SIRTeX's 90-day volume-weighted average price and a 2.1 percent premium to Monday's closing price. On that day SIRTeX requested a trading halt pending news of the bid. Cephalon intends to fund the offer using a portion of its existing cash balance, reported at $636.6 million in cash, cash equivalents and investments.

Yvonne Klemets Wright, Cephalon's manager of corporate communications, called the move to purchase the Australian company and its SIR-Spheres product in line with an acquisition strategy to build a stable of drugs in a range of therapeutic areas. In cancer, Cephalon already markets for breakthrough cancer pain episodes Actiq (fentanyl), acquired in a $444 million stock purchase of Salt Lake City-based Anesta Corp. (See BioWorld Today, July 18, 2000.)

"We increased Actiq revenues by 130 percent in its first full year in Cephalon's portfolio," Wright told BioWorld Today, adding that SIRTeX has deployed a single sales agent for its worldwide SIR-Spheres marketing efforts. "We have more than 500 salespeople total in both the U.S. and Europe who can help market this product."

Cephalon has forecasted SIR-Sphere revenue for this year to total between US$10 million and US$12 million. But it expects its marketing muscle, coupled with an increase in manufacturing efforts, to pay off in rapid growth of SIR-Spheres beginning in early 2005.

Wright declined to say whether Cephalon has plans for other applications of SIRTeX's small-particle technology.

Cephalon said its previously stated 2003 earnings guidance of about 1.50 per share (fully diluted) remains unchanged.

Founded in 1997 to acquire and commercialize a portfolio of three technologies relating to the treatment of liver cancer developed by the Cancer Research Institute in Perth, SIRTeX enjoyed a share of quick success. Its SIR-Spheres quickly gained approval in Europe, Australia and portions of Asia, as well as in the U.S. last March.

SIR-Spheres deliver a high radiation dose to tumors within the liver regardless of their cell of origin, number, size or location. The products, biocompatible radioactive microspheres that contain yttrium-90 and emit high-energy beta radiation, are implanted in a procedure using a catheter placed in the hepatic artery feeding the liver. The SIR-Spheres eventually are trapped in the small blood vessels of the tumors.

Cephalon believes the product's uniqueness will lend itself to tapping a large market.

"We estimate 50,000 cases of liver cancer in the U.S. each year," Wright said. "SIRTeX said it estimates 250,000 cases worldwide. This is one of the only devices that can help combat the tumor in the liver. I don't think that there are any other companies that have a product similar to SIR-Spheres."

SIRTeX said its board indicated that it would recommend accepting the bid. Also, Executive Chairman and President Bruce Gray, its largest shareholder, signed an agreement that provides Cephalon Australia with an option to acquire up to 19.9 percent of the total issued share capital of the Sydney-based company for A$4.85 per share.

Cephalon said it plans to continue SIRTeX's operations in Australia, transitioning SIRTeX's employees to Cephalon Australia. If the bid proves unsuccessful, SIRTeX would pay Cephalon up to about A$2.7 million. SIRTeX is being advised by Three Oaks Group Inc. Credit Suisse First Boston LLC advised Cephalon.

Cephalon, a 1,500-employee company, markets in the U.S. three products - Provigil (modafinil) to treat narcolepsy, Gabitril (tiagabine hydrochloride) as an adjunctive treatment of partial seizures associated with epilepsy, and Actiq. Like the latter, rights to the two former products were acquired by Cephalon. In 1993 it obtained licensing rights to Provigil from Laboratorie L. Lafon, of Maisons Alfort, France. In December 2001 Cephalon bought Lafon for $450 million in cash. Gabitril is marketed under an agreement with Abbott Park, Ill.-based Abbott Laboratories Inc.

Cephalon markets more than 20 products internationally.

But the company, founded in 1987, must work to stay ahead of its competition. Last week Cephalon acknowledged that the FDA accepted an abbreviated new drug application from another company for a generic form of Provigil. The agency approved Provigil to treat excessive daytime sleepiness associated with narcolepsy in December 1998, followed by its U.S. launch in February 1999. Cephalon said it doesn't expect a generic equivalent to be on the market for years, given that its modafinil patent does not expire until 2014, and that its orphan drug status remains in effect until at least June 2006. The company was steadfast in its desire to defend its intellectual property rights. (See BioWorld Today, Dec. 28, 1998.)

Bolstering its product portfolio, Cephalon's pipeline includes three clinical candidates in multiple indications. Its CEP-701 candiate, a tyrosine kinase inhibitor, is in Phase II studies to treat pancreatic cancer and acute myelogenous leukemia. Cephalon called another candidate, CEP-1347, a mixed-lineage kinase inhibitor. It is in a Phase II program to treat Parkinson's disease. A VEGF inhibitor, CEP-7055, is in a Phase I program to treat solid tumors.

Deeper in the research pipeline, a recent deal could play a role in continuing to add to Cephalon's portfolio. Last month the company signed a five-year research deal with MDS Proteomics Inc. Cephalon will provide milestone payments and royalties to use MDS's differential analysis, chemiproteomics, phosphorylation fingerprinting and protein interaction mapping to further develop its chemical library and identify novel targets in central nervous system disorders.

As part of the agreement, Cephalon bought a $30 million convertible note due in 2010, convertible into stock of MDS Proteomics - a subsidiary of Toronto-based MDS Inc. - at $22 per share, which is subject to adjustment if MDS Proteomics sells at a lower price. (See BioWorld Today, Jan. 8, 2003.)

Cephalon's stock (NASDAQ:CEPH) closed Wednesday at $49.95 down 83 cents.