Why You Need To Watch Johnson & Johnson, Synergy, Sagent, and Supernus This Morning
Dec 24th 2013 9:04AM
Updated Dec 24th 2013 9:06AM
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.
Happy holidays, fellow Foolish investors!
As we get ready for a shortened market session this Christmas Eve, let's take a look at four stocks -- Johnson & Johnson , Synergy Pharmaceuticals , Sagent Pharmaceuticals , and Supernus Pharmaceuticals -- which could make health care headlines this morning.
Johnson & Johnson could soon sell its diagnostics business to Carlyle Group
First and foremost, private equity firm Carlyle Group is reportedly near an agreement to acquire Johnson & Johnson's Ortho Clinical Diagnostics Unit for approximately $4 billion, according to a recent Reuters report.
J&J's Ortho Clinical Diagnostics unit was formed through J&J's acquisition of Eastman Kodak's clinical diagnostics division in 1994, which was merged with J&J's own Ortho Diagnostics Systems unit in 1997.
The segment specializes in two main services -- human blood screening and chemical tests -- and employs over 4,000 people worldwide.
J&J's decision to sell the diagnostics unit is based on three main factors:
New molecular diagnostics tests, such as those from Roche and Abbott Laboratories, are chipping away at the importance of older blood and chemical screening technologies.
J&J's market share in diagnostics at the end of 2012 was only 9% -- trailing in fourth place behind Roche (20%), Abbott (11%), and Siemens (10%).
The diagnostics segment posted a 10.5% year-over-year decline in sales last quarter, accounting for only 6.6% of its Medical Device and Diagnostics revenue.
Carlyle has reportedly secured exclusive talks with J&J for the sale, outbidding a rival bid from a partnership between Blackstone Group and Danaher, a health care and industrial conglomerate. Carlyle's exact bid is currently unknown, but a deal could be made within the next two weeks.
J&J's decision to sell its diagnostics unit is very similar to Novartis' decision to sell its blood transfusion screening business to Grifols for $1.7 billion in November.
Synergy gets ready to initiate its phase 2b trial for plecanatide
Meanwhile, Synergy Pharmaceuticals, a biotech company focused on the development of drugs for gastrointestinal diseases and disorders, reported that it had closed patient enrollment for its phase 2b clinical trial of its lead drug candidate, plecanatide.
Plecanatide is a treatment for irritable bowel syndrome with constipation. Analysts believe that the drug could achieve peak annual sales of $550 million if it gains market approval in 2016. That would give the company, which currently has a market cap of $400 million and no revenue, a huge boost.
Plecanatide would primarily compete against Forest Laboratories' and Ironwood Pharmaceuticals' Linzess (linaclotide). Linzess respectively generated $34 million and $10 million in revenue for Forest and Ironwood last quarter.
Although there's not much else for investors to do but sit and wait for further results from Synergy, the latest announcement assures investors that its top drug candidate is still on the right track toward an eventual approval.
Sagent launches its acromegaly treatment
Sagent Pharmaceuticals also recently announced the market launch of Octreotide Acetate Injection, which is intended to help treat acromegaly, a long-term condition in which body tissues overgrow due to excess growth hormone.
Sagent's injection has been approved to reduce blood levels of growth hormone and the insulin growth factor IGF-I. It is indicated for patients who have had an inadequate response to surgery, irradiation, and maximum doses of bromocriptine mesylate, another drug which reduces growth hormones.
Sagent estimates that the U.S. market for the drug is valued at $45 million, due to the relative rarity of acromegaly, which only affects 1 in 25,000 people in the United States.
Therefore, the launch is a positive, but not game-changing development for Sagent, which reported a 23% year-over-year jump in revenue last quarter to $60.8 million. Sagent's revenue is primarily generated by sales of a wide variety of products in vials, syringes, medical devices, and premix bags -- which are used for anti-infective, oncolytic, and critical care indications. Sagent has remained profitable throughout the year, posting a profit of $0.09 per share last quarter -- a strong turnaround after four quarters of unprofitability in fiscal 2012.
Thanks to that robust top and bottom line growth, Sagent has rallied more than 56% since the beginning of 2013.
United and Supernus' Orenitram is approved by the FDA
Last but certainly not least, United Therapeutics and Supernus could both surge this morning, after the FDA approved Orenitram, an extended-release tablet for pulmonary arterial hypertension (PAH) yesterday.
Orenitram, which uses Supernus' novel osmotic technology platform, was produced through a development and license agreement with United Therapeutics. United will pay Supernus milestone fees and royalties as the product is commercialized worldwide.
Orenitram is the first oral prostacyclin analog approved by the FDA for any disease. The approval of the drug was a major surprise, since the drug had already been rejected twice for the same indication. The approval came without any additional data being submitted to the FDA by United and Supernus. The drug could help a small portion of patients achieve some limited exercise, based on trial data from a 6-minute walk test.
Analysts believe that Orenitram could eventually generate modest annual peak sales of $100 million to $250 million, based on the number of patients eventually switched over from subcutaneous, intravenous, and inhaled versions of the drug's active ingredient, treprostinil.
Therefore, Orenitram's approval could be a more significant development for Supernus, which only generated $1.5 million in revenue last year, than for United, which posted revenues of $916 million.
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The article Why You Need To Watch Johnson & Johnson, Synergy, Sagent, and Supernus This Morning originally appeared on Fool.com.Fool contributor Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. 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.
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