Valeant Pharmaceuticals' $5.7 billion bid for Cephalon may spawn a series of copycat deals, Reuters reports. How so? Because it defies the common belief that products nearing the end of their patent lives--such as Cepahlon's Provigil wakefulness drug--aren't worth the trouble.
Valeant's hostile offer has highlighted that, rather than focusing on pipeline meds to fill impending revenue gaps, drugmakers could snap up smaller companies with existing products--and then shed costs like crazy to amp up the margins on those drugs. "You've got a lot of these companies that are facing big patent expiries, not just in Big Pharma. A lot of these companies are bloated as well," Hapoalim Securities analyst Jon LeCroy told Reuters. "[I]f another company can get in there and really chop costs, it makes a lot more sense than leaving these companies on their own."
In light of Valeant's bid, investors seem to think Endo Pharmaceuticals now wears a target. Indeed, Endo's shares have climbed 16 percent since the bid announcement. And Forest Laboratories is up 6 percent. Both companies' top products face a fall off the patent cliff. Forest, for instance, has the antidepressant Lexapro, which loses patent protection next year. Gary Nachman, an analyst with Susquehanna Financial Group, said Medicis or Jazz Pharmaceuticals could fit with Valeant, according to Reuters.
- read the Reuters analysis