British drugmaker Shire
Shire actually kicked off its busy May at the end of April, reporting a solid first quarter where revenue and earnings beat estimates, although R&D costs remain on the upper end of guidance. The most explosive growth belonged to Gaucher disease treatment Vpriv, with sales rising more than 900%, but it could face cheaper competition in the future, most notably from Protalix BioTherapeutics'
And the company isn't resting on its laurels. Three or four potential new indications for Vyvanse, each of which could spur $1 billion to $2 billion in sales, could eventually dwarf the drug's prolific ADHD business.
Don't think this has gone unnoticed by Big Pharma. Shire sits in a position where it could be increasingly attractive to a major pharmaceutical concerned about declining revenue and vanishing patents. AstraZeneca
Enter Advanced BioHealing. The biotech was set to make its big debut last week, but was snatched up before average investors ever got a chance to see the company in public trading. For $750 million, an estimated 19% over what Advanced BioHealing was expected to debut at, Shire got itself Dermagraft, a treatment for diabetic foot ulcers now and potentially venous leg ulcers down the road.
Smith & Nephew
Finally, we come to Cubist Pharmaceuticals
Foolish bottom line
At the end of the day, I think Shire is making solid moves. Shares have gone on a big run, so this is probably not the best time to start a position, but those who already hold shares will likely be safe as long as the firm doesn't overreach on acquisitions. Shire itself could be featured in a megamerger, but investors shouldn't bank on that. Instead, focus on Shire's strong operating numbers, which feature healthy margins and strong revenue growth over the past three years. In an industry struggling with the patent cliff, that's about as good as it gets.
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David Williamson owns no shares of the companies mentioned. The Motley Fool owns shares of Teva Pharmaceutical. Motley Fool newsletter services have recommended buying shares of Teva Pharmaceutical and Smith & Nephew. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.