February 28, 2017 / 4:22 PM / 2 years ago

Exclusive: Merus Labs hires Rothschild to explore options - sources

(Reuters) - Canadian specialty drugmaker Merus Labs International Inc MSL.TO has hired investment bank Rothschild & Co to explore strategic alternatives, including a potential sale of the company, people familiar with the matter said on Tuesday.

The move makes Merus the latest specialty pharmaceutical company to explore its options after taking on a lot of debt to finance acquisitions and struggling to reign in costs, amid increasing pressure on drug prices and political uncertainty.

Merus Labs has not yet started a process to sell itself, and there is no certainty that any transaction will occur, the people said, asking not to be identified because the deliberations are confidential.

Merus Labs did not immediately respond to requests for comment. Rothschild declined to comment.

Merus shares jumped as much as 12 percent in Toronto on the news, and were up 9 percent at C$1.20 in afternoon trading, giving the company a market capitalization of around C$130 million ($100 million).

Toronto-based Merus Labs owns a suite of 12 products spanning therapeutic areas such as cardiology, urology, women’s health and infectious diseases.

The company has grown rapidly in recent years through multiple acquisitions, buying drugs from large pharmaceutical companies like Sanofi SA (SASY.PA) and Novartis AG (NOVN.S). As a result, Merus had long-term debt as of the end of December of $131 million.

Many of Merus’ deals have been focused on building out its presence in Europe, which has become the bulk of its sales.

Merus has seen its stock decline by more than 60 percent since its highs in 2015, dropping in tandem with the broader specialty pharmaceutical industry, which has struggled in recent years amid concerns about U.S. companies’ ability to sustain regular drug price hikes.

U.S. President Donald Trump has stated he will crack down on sharp price hikes in the drug industry, saying that some drugmakers are “getting away with murder” and suggesting that he wants to make the bidding process on drugs more competitive.

However, Merus may be partially insulated from U.S. pricing drug pressures because so much of its sales come from Europe and Canada.

The company’s stock took additional hits in 2016, after missing on earnings forecasts in multiple quarters.

Reporting by Carl O'Donnell in New York and Pamela Barbaglia in London; Additional reporting by John Tilak in Toronto; Editing by Chizu Nomiyama, Bernard Orr

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