“Large Pharma” has frequented the newswire over the past several weeks with announcements that have created some buzz on Wall Street. These events are likely to have a material impact on the companies mentioned and the markets they serve. Companies featured in this review include Sanofi (SNY), Pfizer Inc. (PFE - Free Pfizer Stock Report), Johnson & Johnson (JNJ - Free Johnson and Johnson Stock Report), and GlaxoSmithKline (GSK).
Sanofi Explores Emerging Markets…Likely to Pass on Pfizer
On March 6th, the French drugmaker announced it was interested in doing more acquisitions in emerging markets, citing the sector’s strong growth potential and Sanofi’s keen ability to acquire and integrate companies. Due to the renewed focus in this area, management has noted it would likely not be a participant in the bidding for Pfizer’s animal health unit.
GlaxoSmithKline to Sell Consumer Drugs Unit
In recent news, Britain’s largest drugmaker announced it was resuming its search to sell the European arm of its non-core drug portfolio. Potential suitors include Bain Capital, who has teamed up with Omega Pharmaceuticals, and Dutch private-equity group Waterland. Rival pharma groups, such as Sanofi, and several other private equity firms are also said to be interested in certain parts of the portfolio. Glaxo’s collection of pain killers, dietary supplements, stomach and other treatments up for sale in Europe is expected to fetch around 500 million pounds, or roughly $785 million.
Pfizer to Spin Off Animal Health Business
Top brass at the world’s largest drugmaker recently indicated that Pfizer was more likely to spin off its animal health unit, rather than sell it. Although no official decision has been made, the announcement reflects the significant expected investor appeal of the business. Since coming on hard times, partially spurred by the patent expiration of Lipitor, Pfizer has focused on making itself leaner by divesting certain non-core businesses, including veterinary medicine and infant nutrition. Preliminary estimates indicate the nutrition unit could fetch around $10 billion, while the larger animal health business is currently estimated at about $15 billion to $20 billion.
Pfizer Exits Deal With Biocon
On March 12th, Pfizer announced it was scrapping its deal to sell insulin products made by Biocon, India’s largest biotechnology company. The move comes as somewhat of a surprise as Pfizer had already sunk about $200 million into the alliance, only to cancel it 15 months later. Management at Pfizer indicated the company was focusing on other programs in the growing market of biosimilars, which are low-cost versions of biotech medicines. The move could also be reflective of more pressing issues the company is facing, such as the potential spinoff of its animal health and nutrition units. Either way, the sudden change of heart leaves Biocon in quite the predicament, as it now lacks a partner to sell its insulin drugs in key markets such as the United States. Shares of Biocon tumbled over 6% on news of the breakup.
FDA Panel Backs Continued Testing of Pain Meds
Despite links to bone decay and joint failure, the FDA’s panel of arthritis experts voted unanimously that research on an experimental class of pain drugs for the ailment should continue, but with certain safety precautions. Testing of the drugs was originally halted back in 2010 before any of the medications could gain U.S. approval due to reports of joint failure, but companies like Pfizer and Johnson & Johnson have been adamant about lifting the moratorium on testing their drugs. Indeed, several large drugmakers have touted the meds as a breakthrough for treating osteoarthritis, back pain, and other chronic pain conditions. Though the vote does not necessarily clear the way for approval, the FDA will take into consideration the advice of its panel before making a final decision.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.