Wednesday's Top Health Care Stories: Aerie, Insys, and Owens & Minor

Let's take a look at three stocks -- Aerie Pharmaceuticals (NASDAQ: AERI  ) , Insys Therapeutics (NASDAQ: INSY  ) , and Owens & Minor (NYSE: OMI  ) -- which could all loom large in health care headlines this Wednesday morning.

Aerie soars on positive Roclatan data
Shares of Aerie Pharmaceuticals are up 35% in pre-market trading this morning, after the company announced positive phase 2b trial results for its experimental glaucoma drug, Roclatan. Roclatan, a once-daily eyedrop, is a combination of Aerie's Rhopressa (a phase 3 triple-action glaucoma drug candidate) and latanoprost (a widely prescribed glaucoma drug).

Roclatan achieved its primary endpoint of statistically significant superiority over each of its components by the 29th day of the trial on a group of 297 patients. Mean diurnal intraocular pressures (a benchmark for glaucoma treatments) dropped 34% compared to the latanoprost cohort, and the efficacy of Roclatan topped latanoprost across each evaluated time point. Based on this positive data, Aerie intends to initiate a phase 3 trial immediately.

Aerie does not have any marketed products. The company has not issued peak sales estimates for Roclatan or Rhopressa yet, but analysts at Canaccord Genuity expect peak sales of $600 million for both drugs if approved.

Aerie went public last October for an IPO price of $10 per share. The stock has more than doubled since then.

Insys climbs on new orphan drug designation
Shares of Insys are up more than 5% in pre-market trading, after the FDA granted an orphan drug designation to pharmaceutical cannabidiol (CBD), a cannabis-based treatment for Lennox-Gastaut syndrome, a rare type of pediatric-onset epilepsy.

An orphan drug designation will grant CBD seven years of market exclusivity and a variety of financial benefits if approved. Insys expects to submit an Investigational New Drug Application (IND) for CBD in the second half of 2014.

Insys has two market-approved cannabinoid-based drugs -- Subsys (Fentanyl Sublingual Spray) for breakthrough cancer pain in opioid-tolerant patients, and generic Marinol for chemotherapy-induced nausea and vomiting. 96% of Insys' revenue of $99.3 million in 2013 came from Subsys sales.

However, investors should remember that shares of Insys crashed last month after being hit by a double whammy of weak earnings and fraud allegations. Prosecutors in Detroit charged Dr. Gavin Awerbuch -- who was responsible for 20.3% of all Subsys prescriptions to Medicare beneficiaries between 2009 to 2014 -- with intentionally over-prescribing the drug.

Despite that setback, shares of Insys are up more than 250% over the past year. Insys' closely watched peer in cannabis-based treatments, GW Pharmaceuticals, has climbed more than 900%.

Owens & Minor to buy Medical Action Industries
Owens & Minor just announced that it will acquire custom procedure tray producer Medical Action Industries (NASDAQ: MDCI  )  for $13.80 per share in cash. The deal values Medical Action Industries at $208 million including the assumption of debt, and is expected to close in the fourth quarter of the year. Shares of Owens & Minor are unchanged, but shares of Medical Action Industries have soared 94% on the news in pre-market trading.

Owens & Minor and Medical Action Industries already have a close working relationship, considering that nearly 45% of Medical Action's annual sales of $288 million are made to Owens & Minor.

Owens & Minor expects the acquisition to become accretive to non-GAAP earnings per share by 2015, and estimates annual pre-tax cost synergies of $10 million to $12 million by 2016. The overall impact to Owens & Minor's non-GAAP earnings in 2014 is not expected to be significant and mostly restricted to the fourth quarter of the year.

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