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Drug Roundup – February 22, 2012
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 featured in this review include Valeant Pharmaceuticals (VRX), Teva Pharmaceuticals (TEVA), Pfizer (PFE - Free Pfizer Stock Report), and Merck & Co. (MRK - Free Merck Stock Report).
Valeant Pharmaceuticals Agrees to Buy Probiotica
On February 1, 2012 Valeant announced it would be acquiring the Brazilian-based supplement maker, Probiotica, in a deal worth about $86 million. Probiotica sells over-the-counter food supplements for sports nutrition and various other uses. The company generated $46 million in revenues last year and should make a nice addition to Valeant’s international portfolio.
Valeant Agrees to Buy Eyetech
On February 13th, the Canadian-based drugmaker stayed active on the acquisition front by entering into another agreement to acquire privately held Eyetech. Although terms of the deal were not disclosed, management indicated it included an unspecified upfront payment with the possibility for future milestones down the road. The move comes as little surprise as Valeant has been eager to expand its presence in the ophthalmology space in recent months. In January, the company withdrew its takeover bid for Ista Pharmaceuticals, another eye care manufacturer, citing a breakdown in talks with management. Valeant noted its transaction with Eyetech is expected to be immediately accretive to earnings.
Merck Looks to Expand its Presence in Brazil
On February 15th, the company announced plans to form a joint venture with Brazilian drugmaker Supera Farma, to sell its products in Brazil. The joint venture would initially include about 30 products and is expected to be completed later in the year with Merck maintaining a 51% stake. The move illustrates the company’s growing need to diversify its business in the face of several lucrative patent losses, including its top-selling drug Singulair. An effective expansion into emerging markets should help to offset top-line erosion and better ensure long-term earnings stability.
Teva Outperforms In Fourth Quarter
On February 15th, the world’s largest generic drugmaker posted fourth-quarter profits of $1.59 a share, exceeding our expectations of $1.56. The figure did not incorporate several one-time charges, mostly related to the company’s $6.8 billion acquisition of Cephalon Inc. last fall. During the fourth quarter, total revenues surged 28% year over year to $5.68 billion, largely reflective of the inclusion of Cephlon’s strong branded pipeline, which includes such products as Provigil. On the generic side, sales increased 12%, to $3 billion, supported by the launch of generic Zyprexa.
Pfizer Exploring Partnerships in China
On February 21st, the world’s largest drugmaker announced that it had made significant progress in its joint venture with China’s drug company, Zhejiang Hisun Pharmaceuticals, to manufacture and sell off-patent drugs in that company. The move comes as Pfizer tries to expand its generics segment in order to help offset its patent loss on Lipitor in the fourth quarter of 2011. Several members of “large pharma” are trying to mitigate the impact of expiring patents in western markets by offering high-quality generic products in Asian markets. This seems to be an intriguing option at the moment. We look for Pfizer to continue to explore such opportunities in the coming months as the China’s prescription drug market remains one of the fastest growing in the world.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.