Pharmas Across The Pond

AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Every time I hear about falling off the patent cliff I can’t help but picture Wiley Coyote in mid-flight realizing he is falling off the cliff with that Acme Company anvil ominously above. Too many Saturday morning cartoons in my past. Some Big Pharma companies aren’t just falling off a patent cliff: they’re more like our coyote friend, flailing wildly to find something to fill up their pipeline before that generic anvil squashes them.

Foremost among these is AstraZeneca (NYSE: AZN), whose biggest names Crestor, Seroquel, and Nexxium go off patent over the next few years. New CEO, Pascal Soriot, formerly worked for Swiss drug company Roche. Roche has been a big acquirer in the past and currently has a bid in for gene-sequencer Illumina.

Shareholders hope that AstraZeneca can acquire more than just the joint acquisition of Amylin with Bristol-Meyers-Squibb earlier this year. Several names have been bandied about that AstraZeneca could buy include Amarin Corporation, Questcor Pharmaceuticals, Forest Laboratories (NYSE: FRX), Seattle Genetics, and even Celgene Corporation. Celgene may be a stretch with a 34.33 billion market cap, but Forest Laboratories has activist Carl Icahn pushing for some sort of deal and its market cap of 9.72 billion is less than a third of Celgene's.

The only sure thing is that they will do something as they just suspended their share repurchase program after only fulfilling about half of the planned buyback. Just looking at the P/E of 7.55 and a 3.80% yield, better than Pfizer, one might think “such a deal!” However, with a recent downgrade from J.P. Morgan due to patent losses of their blockbuster drugs and increasing competition on those brands even before patent expiration. AstraZeneca has some issues ahead.

Another British pharma name Glaxo Smith Kline (NYSE: GSK) is one you might want to look at through your monocle. It has one of the highest Big Pharma yields at 4.50% and it is not shy about paying for blockbuster products. For years, shareholders of Human Genome Sciences had waited to see bowler hats and brollies (umbrellas) show up at their Rockville, Maryland headquarters. Finally, the deal was done and Glaxo bought them this spring and acquired the first new lupus drug in decades, FDA approved Benlysta. It should be accretive in 2013.

All you Anglophiles out there should know that Glaxo also makes some famous British nutritional beverages, Lucozade, an energy drink, Horlick’s Malted Milk and Ribena, a fruit ade. (Just a bit of Brittrivia). It also makes smoking cessation products as well as oral care products. Of course it has a huge pipeline in many different diseases as well as vaccines and has a collaboration agreement with Yale University on work for medicines that degrade disease-causing proteins.

Glaxo also has an important collaboration with Theravance (NASDAQ: THRX) on three different asthma and COPD (chronic obstructive pulmonary disease) treatments eventually adding to Glaxo’s already strong Advair inhaler revenues. Glaxo has a P/E of 14.16 and a forward P/E of 10.57. With all these collaborations and the Human Genome Sciences purchase it seems Glaxo doesn’t have the Acme Company anvil hanging over its bowler hat.

If you are a Francophile you may be interested in Sanofi (NYSE: SNY), another big yielder at 3.80%. It has been in the news recently about its Bristol-Myers like diabetes drug, Lyxumia. Similar to Byetta, the Bristol Myers twice daily injectable, Sanofi claims it only requires once a day injection and in combination with Lantus, another Sanofi diabetes drug is supposed to be optimal in effect. According to Pierre Chancel, head of Sanofi Diabetes, it is as effective as Byetta with just one shot a day and causes less nausea.

Sanofi has a 14.11 P/E and a forward P/E of 11.67. Annual revenues are close to $45 billion. It has some other very promising products like Jevtana for use in castration resistant metastatic prostate cancer with prednisone. Jevtana (cabazitaxel) has just been added to the formulary in three Canadian provinces.

The company also has a strategic collaboration in place with Regeneron Pharmaceuticals for work on the development and sale of human monoclonal antibodies.

Sanofi has several main divisions: diabetes, human vaccines, animal health, consumer health care and it also owns five subsidiaries: Genzyme, Sanofi Pasteur, Merial, Chattem, and Zentiva. Just on Oct. 2 it announced the acquisition of Genfar, a Colombian pharmaceutical leader. Sanofi is definitely not falling off a patent cliff and it has been a somewhat underrated and underloved name just because it is European. However, it is laying off 900 workers over three years and would have laid off more if not for the entreaties of the French government. This is an extremely small amount of their workforce that numbers 113,719 employees.

These European names are global pharmas and not to be mistaken with names that are solely tied to Europe for their success. Glaxo with that yield is looking as good as Pfizer and Bristol Myers Squibb and has some consumer staple action going for it, too (Aquafresh toothpaste, tootbrushes, etc.). Sanofi is big in diabetes and vaccines and is on a tear when it comes to acquisitions. The one name I would approach with caution is AstraZeneca. A new CEO and the suspension of the buyback shows they plan to do something to head off a fall off the cliff but that is a leap into the unknown.


leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of AstraZeneca plc (ADR) and GlaxoSmithKline. Motley Fool newsletter services recommend GlaxoSmithKline. 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.If you have questions about this post or the Fool’s blog network, click here for information.

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