Valeant Pharmaceuticals (NYSE: VRX ) is trying to buy Allergan (NYSE: AGN.DL ) for $47.5 billion with the help of billionaire William Ackman, which, with his investment fund, bought almost 10% of Allergan to get a foot in the door.
Last week, he had a presentation with Valeant CEO Michael Pearson where Ackman presented an interesting slide with a laundry list of reasons not to invest in drugmakers.
In the video below, senior biotech specialist Brian Orelli and health-care analyst David Williamson go through the list, discounting many of Ackman's points. For instance he cites patent cliffs as a problem, but investors know that they're coming; everyone could value Pfizer (NYSE: PFE ) properly knowing when generic copies of Lipitor would launch, impacting Pfizer's revenue.
Ackman also complains about pricing pressure, but Gilead Sciences (NASDAQ: GILD ) has been able to launch its hepapatitis C drug, Sovaldi, at $1,000 per pill and despite a decrease in prescriptions Merck's (NYSE: MRK ) diabetes drug franchise, Januvia, U.S. revenue increased year over year in the first quarter thanks to a price increase.
While Brian and Max might not agree with Ackman's general take on the sector, they're more content with his positive view of specialty pharma -- companies that sell smaller drugs that they often acquire rather than develop internally -- and offer up some specialty pharma companies that investors should keep an eye on.
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