There have been several noteworthy developments in the drug space recently, which will likely have a material impact on the companies in this sector and the markets they serve. Companies mentioned in this review include Bristol-Myers Squibb (BMY), Eli Lilly & Co. (LLY), Merck & Co. (MRK - Free Merck Stock Report), Pfizer Inc. (PFE - Free Pfizer Stock Report), Actavis plc. (ACT), and Valeant Pharmaceuticals International (VRX).
With several members of “Large Pharma” scheduled to release fourth-quarter and full-year results in the coming weeks, investors ought to be honed in on the impacts of recent patent losses, emerging generic competition, pipeline activity, and integration progress for the companies that recently completed acquisitions. Some noteworthy upcoming release dates include: Bristol-Myers Squibb (January 24th), Pfizer Inc. (January 28th), Eli Lilly & Co. (January 30th), and Merck & Co. (February 5th).
Actavis is Poised for a Strong Finish
On January 14th, Actavis announced that its adjusted earnings for the fourth quarter will be better than it previously expected. Back in October, management had guided for fourth-quarter adjusted earnings to be between $2.95 and $3.05 a share, but now says its share net will be above the high end of that range. Although no further specifics were given, shares of Actavis stock rose 3% in price on the news. The company is scheduled to report fourth-quarter and full-year results on February 20th.
FDA Votes to Approve Merck’s Blood Thinner
On January 15th, The Food and Drug Administration’s panel of cardiology experts voted in favor of approving the drug Vorapaxar to help prevent blood clots in patients with a history of heart attacks. While this is positive news for Merck, it came as somewhat of a surprise on Wall Street as many analysts had expected the drugmaker to shut the program down after studies showed that Vorapaxar significantly increased the risk of internal bleeding. Before these risks came to light back in 2011, Merck had touted the drug as a potential blockbuster medication, but since has conceded its diminished prospects and is seeking FDA approval for a much narrower group of patients, mainly those who have had a recent heart attack, but have not had a stroke or internal bleeding. The company now views Vorapaxar as an add-on therapy to be used with other common blood thinners, such as aspirin. Investors should note that the FDA is not bound by the panel’s recommendation, but takes its advice into consideration when reviewing investigational medications such as these. If approved, Merck plans to market the drug under the brand name Zontivity.
Valeant Receives Antitrust Clearance for Solta Acquisition
On January 15th, Canada-based Valeant Pharmaceuticals International announced the January 14th expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to the previously announced tender offer by its indirect wholly-owned subsidiary, Sapphire Subsidiary, for all the outstanding shares of common stock of Solta Medical at a price of $2.92 a share. The expiration of the HSR waiting period satisfies one of the conditions to consummate the tender offer.
Valeant’s agreement to purchase Solta was first announced on December 16th and is valued at roughly $250 million (a 40% premium at the time of the announcement).The transaction is scheduled to close sometime in the first quarter of 2014, at which time management expects it will be immediately accretive to cash earnings per share. Solta sells energy-based medical device systems for aesthetic applications that generated revenue of approximately $145 million in 2012.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.