Earnings reports for companies that are waiting to be acquired don't really matter that much, except to make sure that everything is running fine so that an acquirer-in-waiting doesn't get cold feet or another suitor doesn't get drawn into the bidding mix -- such as what happened during the Boston Scientific
To that end, things appear to be running just fine at Swiss biopharmaceutical company Serono
Rebif sales grew 18.7% to $375 million, even in the face of higher competition with the rollout of Elan's
Since Rebif and the $123 million earned from fertility drug Gonal-f account for the vast majority of Serono's sales -- more than 80% -- I like to look at these two drugs to gauge the quality of Serono's quarterly results and future, since the company has few other drugs on the market.
Even with the surprisingly high increase in year-over-year sales for Rebif, I'd still be leery of acquiring Serono, because the whole market for multiple-sclerosis drugs is going to come under intense competition by around 2010, if Novartis and Genzyme can advance their novel and differentiated MS drugs out of the clinic and onto the market, not to mention the potential for generic competition in this market as well.
I'll give Serono some credit for good top-line and bottom-line results for the quarter, although if it weren't getting bought out, I'd be leery of being a long-term holder of the stock because of the future competitive concerns. But that's all irrelevant, since Merck KGaA's $18 billion acquisition will close in early 2007, barring some disastrous fourth-quarter earnings release from Serono or an unexpected pulling of a drug from the market.
Fool contributor Brian Lawler does not own shares of any company mentioned in this article.