Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Good morning, fellow Foolish investors! Let's take a look at three companies -- Pfizer (NYSE:PFE), GW Pharmaceuticals (NASDAQ:GWPH), and VIVUS (NASDAQ:VVUS) -- which could loom large in health care headlines this morning.
Is Pfizer planning to sell its generics business to Valeant or Actavis?
First and foremost, a bidding war could be brewing for Pfizer's branded generics business, according to a recent Reuters report.
Pfizer's generics business, known as the Established Products segment, generated $7 billion in sales during the first nine months of 2013 and accounted for 18% of the company's top line.
Last July, the company announced that starting in fiscal 2014, its operations would be streamlined into three business units -- two for patent-protected brands and a third one for generics.
Since that announcement, there has been plenty of speculation that Pfizer would eventually sell or spin off its generics business, as it had done with its animal health business Zoetis in February 2013.
That move would allow Pfizer to concentrate its efforts on rebuilding its pharmaceutical business, which took a huge hit with the 2011 patent expiration of its blockbuster cholesterol drug Lipitor, which once generated peak sales of $13 billion.
Valeant Pharmaceuticals (NYSE:BHC), Actavis, and Mylan are reportedly interested in acquiring Pfizer's generics business, although no official discussions have started yet. Both Valeant and Actavis have grown considerably over the past few years through acquisitions. Valeant's 2013 acquisition of Bausch & Lomb and Actavis' (formerly known as Watson Pharmaceuticals) acquisitions of Actavis in 2012 and Warner Chilcott in 2013 turned those two companies into 800-pound gorillas in the generics market.
The alarming inorganic growth of Valeant and Actavis has led to speculation that Teva and Mylan could be forced to merge to remain competitive. Purchasing Pfizer's generics portfolio would make Valeant or Actavis even larger, possibly marginalzing smaller players like Mylan and Teva.
GW Pharmaceuticals expands into Latin America
Meanwhile, GW Pharmaceuticals entered an agreement with French pharmaceutical company Ipsen to promote and distribute Sativex, its controversial cannabis spray, in Latin America (excluding Mexico and the Caribbean islands). Sativex is used to treat spasticity in multiple sclerosis (MS) patients, and has been approved in 24 countries, primarily across Europe.
GW and Ipsen plan to start regulatory filings across Latin America during 2014 for the same indication. Sativex is also being tested in phase 3 trials as a cancer pain treatment. The agreement with Ipsen also entitles the latter to both MS spasticity and cancer pain indications.
GW is also focused on eventually expanding into North America, where it is partnered with Otsuka Pharmaceuticals for phase 3 trials, but faces strong regulatory headwinds due to the controversial nature of medical marijuana. It is also partnered with Novartis, Almirall, Bayer, and Neopharm for the eventual distribution of Sativex to parts of Asia, the Middle East, and Europe.
Sales of Sativex, GW's only approved product, have been sluggish so far, and the company only generated $44.2 million in revenue in fiscal 2013 -- an 8.5% drop from the prior year.
However, if approved in additional markets for both MS spasticity and cancer pain indications, analysts believe Sativex could generate peak sales of over $800 million -- which would be a major boost for a company with a market cap of $550 million.
VIVUS partners up with Aetna
Last but not least, VIVUS, the maker of the obesity drug Qsymia, announced a surprising partnership with health care benefits company Aetna (NYSE:AET).
The deal allows VIVUS to integrate its Qsymia capsules into a pilot program from Aetna to evaluate the benefits of prescription medication in weight loss. The program is the first of its kind between VIVUS and a health care provider.
VIVUS' program is being offered to self-insured plan sponsors, and participants will receive memberships to the Lose It! mobile app, a personal fitness tracking app created by Aetna and CarePass which encourages weight loss through positive lifestyle changes.
Although this announcement sounds like positive catalyst for Qsymia sales, investors should exercise caution. VIVUS only generated $6.4 million in Qsymia sales last quarter -- a far cry from the peak sales estimates of $3.6 billion that analysts had forecast for the drug. In addition, VIVUS has already tried this before -- it launched a mobile fitness app in March 2013 which dubiously advertised Qsymia under the guise of a fitness and calorie tracking app.
Nevertheless, any positive news will probably lift VIVUS, which has fallen 35% over the past twelve months after three CEO changes last year, a bitter proxy fight with a major shareholder, and the resignation of its president, Peter Tam.