article that pushed medicis shares up 5% - Biopharm Insight
13/10/2011
Medicis' possible suitors watching November sales, industry sources say
Limited number of dermatology bidders
Caution that generic version could deter interest
Medicis (NYSE:MRX) could see a catalyst for a possible sale in November after generic versions of its drug Solodyn enter the market, according to bankers and industry sources.
Generic versions of acne drug Solodyn in three different doses (40, 90, and 135mg) are expected to launch as early as November. Medicis has five new dosage strengths (55, 65, 80, 105, and 115mg) of Solodyn on patent that expire 2018 at the earliest.
Two industry bankers and a top Medicis shareholder explained that potential bidders may be waiting to see how the generic versions of Solodyn impact Medicis' Solodyn franchise. Potential bidders are on the sidelines right now, waiting to see what the sales look like once the generics enter the market, he said.
The shareholder said that the company has also offered patient assistance programs for the drug, which has helped increase prescription numbers.
Solodyn sales generated approximately USD 389m in revenue in 2010 for Medicis. The drug generated revenues of USD 196m for the first two quarters of 2011, and total sales expected this year are USD 433m, according to BioPharm Insight data.
First-tier bidders for the company could be Valeant (NYSE:VRX) and privately-held Galderma. Second-tier bidders could include Warner Chilcott (NASDAQ:WCRX) and Teva (NASDAQ:TEVA), the shareholder said. Medicis reportedly rebuffed a hostile offer from Valeant this past summer.
One of the industry bankers said Medicis is a good fit for Warner Chilcott, since it's the right sized target and has a pretty attractive position in the market. “I don’t see Teva doing it; I would be surprised. But this feels like a Warner Chilcott type of deal,” he said.
A second industry banker said November sales numbers might be a catalyst for a buyer to step forward. “Solodyn is a complex beast and there is always someone who seems to think there will be something around the corner, and some catalyst that will help people get their hands around it,” he said.
A separate industry source agreed that Galderma and Warner Chilcott would make sense as potential buyers for the business. “I think Valeant is a bidder; it makes sense for them. They would also be less interested in a competitive bidding process,” the source said. He added that his take on the situation was that Medicis had walked away from Valeant's offer.
When asked whether a November catalyst makes sense, the industry source said it may be a potential trigger. “The problem at the moment is people are reluctant to kick off an auction process in the current market, [and] whether someone steps up in November could depend on what the financing markets look like then,” he said.
There are a limited number of companies in the dermatology space, and because of that, most companies have already taken a look at Medicis, the second banker said. Medicis is one of the biggest companies in the dermatology arena, and the aesthetics business is attractive. A third industry banker said in his view Medicis is one of the most attractive targets in healthcare.
The first banker said the November trigger point is not necessarily a reason why potential bidders are currently uninterested. “You can look at the number of folks who have filed ANDAs to see what the intensity of competition is,” he said. ANDAs, or Abbreviated New Drug Applications, are sent to the FDA Office of Generic Drugs for the review and ultimate approval of a generic drug product.
The first banker said if Medicis is able to show that it has been successful in switching patients onto the second or third generation Solodyn, it could be a case for sale. If Medicis is able to show that the prescriptions for its other products are rising, then maybe a bidder would step in. “I don’t see it. The stock price has come back [up] from management issues,” the first banker said.
“Drugs have gone generic before -- if the drug has gone generic, it reduces the value of the infrastructure,” the first banker said. He added, “I don’t know if that’s necessarily the catalyst for someone to act." The first banker questioned whether bidders would jump in when its products are going generic, and there is conversion pressure. “That would be a weak situation to pay a premium for,” he noted.
An industry investor explained that if the company valuation decreases once generic Solodyn comes to market in November, Medicis may be less willing to sell. “It might make people more interested, but also will also make deal less likely,” he said.
It is easier for an acquirer's board to support a deal when things are going well at the target company, versus buying a reclamation project, the investor said. “I’m voting it makes it less valuable, once [generic] Solodyn goes to market,” he said.
On the other hand, there are relatively few assets in specialty pharma right now, the investor noted.
A fourth banker said it is much easier for an M&A team and a pharma company to justify an acquisition opportunity if there is a technology platform. “So there’s not just binary risk, that makes it easier to sell to the board, as opposed to binary risk,” he said.
Medicis recently received FDA approved on its premarket approval application to expand the approved use of Restylane injectable gel, a hyaluronic acid dermal filler, to include lip augmentation.
by Kimberly Ha and Matthew Smith
AI
