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 Pfizer Inc. (PFE – Free Pfizer Stock Report), Merck & Co. (MRK - Free Merck Stock Report), Johnson & Johnson (JNJ - Free J&J Stock Report), and Actavis (ACT).
Pfizer Goes Direct With Viagra
In recent news, Pfizer announced it would be selling the popular erectile dysfunction treatment online in order to better serve its customers. Instead of having to go to the pharmacy in person, men will be able to order Viagra directly from its manufacturer and have it delivered right to their homes. Given the potential embarrassment that men might face filling their prescriptions in person, and the wide array of counterfeits currently available online, Pfizer believes the approach will offer two key advantages in terms of privacy and quality assurance. While the direct-selling strategy is highly uncommon among large pharma, the company is confident it will help boost sales of Viagra going forward. In 2012, the drug generated just over $2 billion in revenue, up 4% from the prior year.
Merck Announces Substantial Debt Offering
On May 15th, the New Jersey-based drugmaker priced a $6.5 billion public offering of unsecured notes with due dates ranging from May 2016 to May 2043. Management indicated that proceeds from the notes will be used to repurchase common stock and for general corporate purposes including the repayment of outstanding commercial paper borrowings and upcoming debt maturities. The offering is expected to close on May 20th, subject to customary conditions.
Johnson & Johnson Wins Expanded Approval of Simponi
On May 15th, Johnson & Johnson announced it had won U.S. approval to use its rheumatoid arthritis drug (Simponi) as a treatment for moderate to severe ulcerative colitis, an inflammatory disease that affects the colon. Given that roughly 620,000 people in the U.S. suffer from this disease, the expanded approval of Simponi ought to help support a nice boost in sales as J&J jockeys for its share of the market. The drug, which was originally approved back in 2009, generated more than $600 million in sales last year. Consensus estimates suggest this figure could double to $1.2 billion by 2017.
Actavis Working Both Sides of the Deal Table
These past few weeks have been a whirlwind of activity for the world’s third largest generic drugmaker. First, news broke that Actavis was in talks to be acquired by Canadian-based drug company Valeant Pharmaceuticals International. Shortly after this deal supposedly fell through, the company received a $15 billion takeover offer from rival Mylan Pharmaceuticals, a bid that was quickly rejected. Somewhere in the middle of these discussions, potential merger talks began to heat up between Actavis and Warner Chillcott. With the Valeant and Mylan deals dissolving, the most likely consolidation at the moment appears to be between Actavis and Warner Chillcott. While an agreement has yet to be reached, both companies have acknowledged the engagement and indicated that talks are still in the early stages. Shares of Actavis have surged nearly 20% since May 1st.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.