Let's take a quick look at five stocks -- Mylan (MYL) Abbott Laboratories (ABT 0.49%), Shire (NASDAQ: SHPG), Exelixis (EXEL 1.84%), and Progenics (PGNX) -- which could all loom large in health care headlines this Monday morning.
Mylan acquires Abbott's off-patent portfolio for $5.3 billion
Mylan has just agreed to purchase Abbott Laboratories' non-U.S. specialty and branded generic business for $5.3 billion. The deal will be conducted via an all-stock transaction of 105 million common shares, which represent a 21% stake in Mylan. Shares of Mylan are up nearly 2% following the announcement.
The assets included in the deal include over 100 drugs that generate approximately $1.9 billion in annual sales. The deal will also include a sales force of roughly 2,000 sales representatives in over 40 non-U.S. markets and two manufacturing facilities. Mylan is expected to use the deal to move its tax domicile from the U.S. to Switzerland and lower its corporate tax rate. Mylan expects the deal to immediately become earnings accretive, adding approximately $0.25 per diluted share in the first year. Abbott intends to use the proceeds of the sale to invest in other opportunities.
Mylan's main rivals, Teva Pharmaceutical and Actavis, are respectively domiciled in Israel and Ireland, which both have lower corporate tax rates than the United States. Mylan had previously tried to acquire Swedish drugmaker Meda AB with the same aim earlier this year, but was rejected.
Shire could finally give in to AbbVie's fifth offer
AbbVie (NYSE: ABBV) has raised its bid for Shire for a fifth time with a $53.7 billion takeover proposal, which grants Shire shareholders £24.44 in cash and 0.896 shares of new AbbVie shares. The new deal, if accepted, will result in Shire investors owning approximately 25% of the combined company. Shire has stated that it is now willing to recommend the new offer to shareholders.
AbbVie is interested in acquiring Shire for two key reasons -- to move its tax domicile from the U.S. to Ireland, and to diversify its portfolio away from its blockbuster arthritis drug Humira, which generated $10.7 billion in revenue (57% of AbbVie's top line) last year, but will lose patent protection in Europe in 2016 and in the U.S. in 2018.
Shire's portfolio mainly consists of attention deficit hyperactive disorder (ADHD) and rare disease drugs. Sales of its top drug, the ADHD drug Vyvanse, rose 19% year-over-year last year to $1.23 billion.
Exelixis soars on positive phase 3 results
Shares of Exelixis are up 12% in pre-market trading this morning on good news about cobimetinib, an investigational MEK inhibitor that it the company is co-developing with Roche's Genentech.
A phase 3 trial testing a combination of cobimetinib and Genentech's BRAF inhibitor Zelboraf met its primary endpoint of helping advanced melanoma patients live significantly longer without their disease worsening (progression-free survival) when compared to Zelboraf alone. Both MEK and BRAF inhibitors block certain proteins along a signaling pathway which regulates cell division and survival. If cobimetinib is approved, analysts at Maxim Group expect it to generate peak sales of $700 million, which would translate to $150 million to $200 million in revenue for Exelixis.
While this is a positive development, investors should remember that Exelixis' most closely watched drug is Cometriq, a drug that the FDA approved to treat metastatic medullary thyroid cancer (MTC) in 2012. Cometriq only generated $15 million in 2013 sales, but if the drug is approved for other indications -- such as prostate, liver, and lung cancers -- Piper Jaffray believes the drug could generate peak sales of $1.7 billion by 2020.
Progenics surges on sNDA label expansion of Relistor
Last but not least, the FDA has just notified Salix Pharmaceuticals that the data submitted for its supplemental new drug application (sNDA) for subcutaneous Relistor to include patients with opioid-induced constipation (OIC) taking opioids for chronic non-cancer pain is sufficient for approval.
Relistor was developed by Progenics, which signed a worldwide licensing agreement with Salix in 2011. The drug was originally approved in 2008 for opioid-induced constipation, and was originally commercialized by Wyeth Pharmaceuticals prior to its acquisition by Pfizer.
Salix will fund the development, registration, and commercialization activities for the drug worldwide except for Japan, where the marketing rights have been licensed to Ono Pharmaceuticals. Salix is obligated to pay Progenics regulatory milestones up to $90 million, sales-based milestones up to $200 million, royalties on product sales in the U.S., and 60% of all revenue from non-U.S. sublicensees. Shares of Progenix are up 12% in pre-market trading following the announcement.
