Valeant Pharmaceuticals (VRX) made another prudent acquisition: the company is buying Medicis Pharmaceutical Corp. (MRX) for $2.6 billion.
Valeant, once known as Biovail, was formed after a 50/50 merger with Valeant. Shares are up nearly 14%, trading at around $58 at the time of writing. Investors are reacting positively to the purchase, because Valeant has a positive track-record in turning its acquisitions into profits.
Valeant is good at generating profits from its acquisitions. The company itself reduced its management layer, focused on a specific area of medicine, and grew itself by acquiring companies that met its focused mandate in the area of dermatology.
Business Section: Investing Ideas
Before buying any drug and biotechnology stocks on speculation that it will be taken over, ask yourself these questions:
1. Is the company developing a drug that would appeal to a bigger player?
2. What phase is its potential product at in its clinical study?
3. Does the company have sufficient cash for more research in development; should there be delays in its product development?
4. Is a takeover already priced in its shares?
5. Will the company be able to raise cash from the market or run on its own in the absence of a takeover?
6. Will the company be able to raise cash from the market or run on its own in the absence of a takeover?
7. Is the company held by any mutual or hedge funds?
Here’s a list of stocks we think meet these criteria: List Average 1-Year Return: 103%
Arena (ARNA), Valeant, and Theravance, Inc (THRX) were already mentioned in this article about pump and dump.
1. Arena Pharmaceuticals, Inc. (ARNA, Earnings, Analysts, Financials): Focuses on discovering, developing, and commercializing oral drugs in the therapeutic areas of cardiovascular, central nervous system, inflammatory, and metabolic diseases. Market cap at $1.98B, most recent closing price at $9.11. Further research about buying Arena is available at Seeking Alpha.
2. Valeant Pharmaceuticals International, Inc. (VRX, Earnings, Analysts, Financials): A specialty pharmaceutical company, develops, manufactures, and markets pharmaceutical products in the areas of neurology, dermatology, and branded generics. Market cap at $15.26B, most recent closing price at $51.19.
3. Theravance Inc. (THRX, Earnings, Analysts, Financials): Engages in the discovery, development, and commercialization of small molecule medicines for various therapeutic areas, including respiratory disease, bacterial infections, and central nervous system (CNS)/pain. Market cap at $2.63B, most recent closing price at $27.10. GlaxoSmithKline (GSK) increased its ownership in Theravance, and now owns 25.8 million, or 26.7% of the total outstanding shares.
Dendreon often makes the news as a potential takeover target:
4. Dendreon Corp. (DNDN, Earnings, Analysts, Financials): Engages in the discovery, development, and commercialization of therapeutics to enhance cancer treatment options for patients. Market cap at $700.79M, most recent closing price at $4.54. Dendreon was talk of being an acquisition target between June and July.
These companies have hedge fund ownership:
5. Idenix Pharmaceuticals Inc. (IDIX, Earnings, Analysts, Financials): Engages in the discovery and development of drugs for the treatment of human viral and other infectious diseases in the United States and Europe. Market cap at $761.22M, most recent closing price at $5.83. Baupost owns 10 million shares in this company.
6. Aveo Pharmaceuticals, Inc. (AVEO, Earnings, Analysts, Financials): Engages in the discovery and development of cancer therapeutics. Market cap at $416.18M, most recent closing price at $9.53 Baupost owns 5.08 million shares in this company.
Written by Chris Lau. To get a snapshot for each company, click on the company icon. To get more detailed fundamental information on any of the companies, open the snapshot and select “number cruncher.”
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Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Arena Pharmaceuticals, Inc. (ARNA, Chart, Download SEC Filings)
- Valeant Pharmaceuticals International, Inc. (VRX, Chart, Download SEC Filings)
- Theravance Inc. (THRX, Chart, Download SEC Filings)
- Dendreon Corp. (DNDN, Chart, Download SEC Filings)
- Idenix Pharmaceuticals Inc. (IDIX, Chart, Download SEC Filings)
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