Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Forest Laboratories (NYSE: FRX ) , a branded drug developer operating in the U.S. and Europe, galloped higher by as much as 17% after announcing the acquisition of privately held Aptalis for $2.9 billion in cash from TPG Capital.
So what: Normally, you don't see an acquiring company soar like this, but the cost savings and profit outlook given by Forest have investors excited. Aptalis, which is a gastrointestinal disorder and cystic fibrosis drug developer, will add $700 million in revenue by 2015, reduce synergistic costs by as much as $125 million in 2016, and should add an adjusted (non-GAAP) $0.78 to EPS by 2015. Forest will fund the transaction with $1 billion in cash on hand as well as $1.9 billion in debt. Pending regulatory approval, the deal will close in the first-half of this year.
Now what: Finally, something that Forest Labs shareholders can be excited about! The deal couldn't come at a better time because Forest Labs' best-selling drug, Alzheimer's disease treatment Namenda, is going to lose patent protection in 2015. But the revenue from this transaction, and EPS for that matter, should more than cancel out the loss of Namenda, even allowing Forest to potentially pay down some of its debt between the closing of this transaction and Namenda's patent exclusivity loss in 2015. Following Forest's more than doubling in share price I can't say I'm a personal fan of the company, but it no longer belongs on any of my "most perilous pipeline" lists.
Will this top stock run circles around Forest Labs in 2014?
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.