MELBOURNE, July 12 (Reuters) – Embattled Australian drug maker Sigma Pharmaceuticals (SIP.AX) wants South Africa’s Aspen Pharmacare (APNJ.J) to improve its A$648 million ($567 million) bid but declined to extend Aspen’s exclusive negotiations.

In its first detailed response since Aspen on July 7 cut its offer by 8 percent to A$0.55 a share, Sigma on Monday gave a mixed message.

Australia’s generic drugs market leader said it was willing to work with Aspen to come up with a better proposal, but made clear it was not about to cave in despite its debt woes.

“Aspen has also been advised that such discussions should not be interpreted as a willingness on the part of the board to recommend to Sigma shareholders an offer of A$0.55 per share,” Sigma’s general counsel Sue Morgan-Dethick said in a statement.

The move initially sent Sigma’s shares down 3.3 percent, but the shares rebounded to trade flat at A$0.455, holding 17 percent below Aspen’s offer price, reflecting continued doubts that a deal will go ahead.

The broader Australian market .AXJO was up about 0.4 percent.

Simon Marais, chief investment officer at Orbis Investment Management, Sigma’s second-largest shareholder, said the board was doing the right thing but should give shareholders the opportunity to look at the A$0.55 a share offer.

“We would evaluate it. That’s far from saying we would take it. We’re not saying it’s good. We’ll at least look at it,” he said.

Marais declined to say what Orbis would consider to be a fair price for Sigma.

Orbis has been snapping up Sigma’s beaten down shares over the past two months and now owns a 9.25 percent stake, behind the group’s largest shareholder Lazard Asset Management, with 9.5 percent. Lazard Asset Management declined to comment.

VALUATION

Aspen pared its offer last week following a review of Sigma’s books and a profit warning from Sigma about its generic drugs business. [ID:nSGE666016]

The new offer is well below broker JPMorgan’s and Wilson HTM’s valuations at 75 cents and 66 cents a share respectively.

However analysts said those valuations could change when the outlook for Sigma is clearer. The company warned about its profits outlook two weeks ago suggesting that its profit forecast of A$80 million for the year to January 2011 would be hard to achieve due to tough competition in generic drugs.

“If competition worsens, there’s downside risk to our 75 cents valuation,” JPMorgan analyst Anasuya Ramesh said.

Sigma said it is reviewing expressions of interest for parts of the company, including its generics business, and told shareholders to take no action.

Aspen, which is about 19 percent owned by the UK’s GlaxoSmithKline (GSK.L), is keen to expand in Australia. A bigger beachhead in Australia would give it better access to fast-growing Asian markets, analysts say.

Its senior management, who own about one-fifth of the company, have built up a reputation for not paying too much in for acquisitions. [ID:nSGE6660JV]

Lazard (LAZ.N) is advising Sigma and Investec (INLJ.J) is advising Aspen. ($1=1.142 Australian Dollar) (Reporting by Sonali Paul; editing by Balazs Koranyi and Dhara Ranasinghe)