Let's take a look at four companies -- Medtronic (NYSE: MDT ) , Covidien (NYSE: COV ) , Bluebird Bio (NASDAQ: BLUE ) , and Gilead Sciences (NASDAQ: GILD ) -- which could all loom large in health care headlines this Monday morning.
Medtronic buys Covidien for $42.9 billion
Medtronic just confirmed that it will purchase Covidien in a $42.9 billion cash and stock deal valuing the company at $93.22 per share -- a premium of nearly 30% from Covidien's closing price last Friday. Each share of Covidien will be converted into the right to receive $35.19 in cash and 0.956 shares of Medtronic. Shares of Medtronic are up 11%, and shares of Covidien are up 34% in pre-market trading this morning.
Medtronic shareholders will benefit from the acquisition in two major ways.
First, the deal allows Minneapolis-based Medtronic to move its tax domicile to Dublin, Ireland, where Covidien is incorporated. That strategy, known as tax inversion, will permit Medtronic to pay a much lower corporate tax rate than in the U.S.
Second, Covidien's three business segments -- surgical solutions, vascular therapies, and respiratory and patient care -- fit well into Medtronic's Cardiac and Vascular Group and Restorative Therapies Group, which together accounted for 90% of its top line last quarter. Medtronic believes that the acquisition will become earnings accretive in the first fiscal year and achieve $850 million in annual pre-tax cost synergies by the end of fiscal 2018.
Bluebird Bio takes flight on positive initial results for LentiGlobin
Shares of Bluebird Bio are up more than 68% in pre-market trading this morning, after the company reported positive initial results for its gene therapy candidate LentiGlobin as a treatment for beta-thalassemia major, a blood disorder characterized by the excessive destruction of red blood cells leading to anemia.
One patient in Bluebird's LG001 trial and two patients in its HGB-205 study showed statistically significant increases in total hemoglobin, and were able to be weaned off of blood transfusions.
LentiGlobin is currently in phase 1/2 trials in the U.S. and France for the beta-thalassemia indication. BlueBird recently initiated a larger LentiGlobin trial for beta-thalassemia in the U.S. which will enroll 15 patients, and expects to report updated data from these studies by the end of the year.
Bluebird's most advanced pipeline candidate is Lenti-D, a potential treatment for Childhood Cerebral ALD (Adrenoleukodystrophy), a central nervous system disorder. The company went public last June at an IPO price of $17.00 per share.
Gilead Sciences reports positive top-line results in Japan for its HCV combo
Last but not least, Gilead Sciences just reported positive top-line results from a phase 3 trial in Japan evaluating a once-daily fixed-dose combination of Sovaldi and the NS5A inhibitor ledipasvir (with and without ribavirin) in patients with hepatitis C (HCV).
100% of the patients in both the treatment-experienced and treatment-naive groups receiving the combination treatment without ribavirin achieved a sustained virologic response 12 weeks after the end of the therapy. 96% of treatment-naive patients and 100% of treatment-experienced patients receiving the combination with ribavirin achieved a sustained virologic response. Across all arms of the study, 99% of patients with cirrhosis achieved a sustained virologic response.
Based on that positive data, Gilead plans to submit a new drug application (NDA) for the ledipasvir and Sovaldi combination with the Japanese Pharmaceutical and Medical Devices Agency by the end of 2014. Sovaldi was approved in the U.S. last December and in the E.U. in January. The drug generated $2.27 billion in sales last quarter -- beating average analyst estimates by more than $1 billion.
Although this positive development doesn't address the main issue with Sovaldi -- its controversial $84,000 price tag for a full 12-week treatment -- it indicates that Gilead could successfully use Sovaldi as the foundation for a new generation of combo HCV treatments, just as it previously used Viread to develop a portfolio of blockbuster HIV drugs.
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