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There have been several noteworthy developments in the drug space recently. They will likely have a material impact on the companies in this sector and the markets they serve. Companies featured in the March review include Amylin Pharmaceuticals (AMLN), Novo Nordisk (NVO), Eli Lilly & Co. (LLY), Johnson & Johnson (JNJ - Free Johnson & Johnson Stock Report), Sanofi-Aventis (SNY), Merck & Co. (MRK - Free Merck Stock Report), and Novartis (NVS).

Pipeline Issues Weigh on Amylin
California-based drugmaker Amylin Pharmaceuticals experienced a few setbacks regarding potential new products in recent weeks. On March 3rd, shares of AMLN stock tumbled 25% on news that its leading pipeline candidate, Bydureon, failed to match a rival treatment made by Novo Nordisk. In a 26-week, 900-patient study, the diabetes medication was unable to meet its primary goal of proving it was as effective as Novo’s version, Victoza. On March 17th, Amylin suffered yet another setback when it announced the suspension of clinical activities associated with a new obesity treatment, citing the need to evaluate a new antibody-related laboratory finding. These pipeline delays have raised concerns about Amylin’s long-term growth prospects.

Eli Lilly to Acquire J&J’s Animal Health Unit
On March 14th, Eli Lilly & Co. announced plans to buy Johnson & Johnson’s animal health business for an undisclosed sum. While J&J is not considered a major player in the market, its 50 products (primarily for swine and poultry) will strengthen Lilly’s presence in Europe and increase diversity within its portfolio. Sales from Lilly’s animal health unit jumped 15%, to $1.4 billion last year. It is currently the fourth largest participant in the market.

Big Pharma’s Exposure to Japan
In the wake of the natural disaster crisis in Japan, several large U.S. and European pharmaceutical companies may face some near-term economic headwinds. The earthquake, and the subsequent tsunami, have ravaged the country and slowed production across many major industries. Those with significant exposure to Japan may see an impact in their second-quarter results. Swiss-based drugmaker Novartis, for example, gets roughly 8% of its total revenue from this region. 

Eli Lilly Reluctant to Merge
On March 19th, Eli Lilly’s chief executive officer announced the company has no intention of merging with one of its peers to deal with the difficult times approaching. In the face of patent expirations and increasing competition from generics, the branded side of the industry has entered into a period of widespread consolidation. Eli Lilly will instead look to new innovative products to help fuel growth and weather the upcoming uncertainties. The company will lose exclusivity on its top-selling product, Zyprexa, this October. Zyprexa accounted for 22% of total revenue in 2010.

Sanofi and Merck Abandon Animal Health Joint Venture
On March 22nd, Sanofi-Aventis and Merck & Co. announced they were abandoning their $5 billion joint venture, citing the complexity of selling assets to appease regulators.  The pair would have had to sell assets worth roughly $500 million in annual revenue to clear regulatory hurdles. If completed, the combined entity would have accounted for nearly one-third of the global animal health market.
 
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.