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Abbott Labs Will Buy St. Jude Medical For $25 Billion

Abbott Laboratories ( ABT ) agreed to buy St. Jude Medical ( STJ ) in a deal that values the maker of heart devices at $25 billion, making its biggest ever acquisition as the industry consolidates to gain bargaining power with hospitals. St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 share of Abbott common stock, representing a total of approximately $85 per share, according to a statement Thursday. Medical devices makers are merging to get access to new technology as hospitals push for lower prices. St. Jude last year acquired Thoratec for $3.4 billion, adding left ventricular pump devices that take over for a failing heart. The combined Abbott-St. Jude medical company will have a pipeline of new medical device products across cardiovascular, diabetes, vision and neuromodulation patient care, according to the statement. Abbott said in the statement it has financing for both St. Jude Medical and for its planned acquisition of Alere ( ALR ) for $5.8 billion, sending Alere shares higher in early trading on the stock market today . Abbott Chief Executive Officer Miles White declined to reiterate his commitment to the Alere deal last week on the company’s earnings call. Alere hasn’t yet filed its 10-K report with U.S. regulators and has been subpoenaed by the Justice Department. St. Jude Medical closed Wednesday at $61.95, giving the company a market value of about $17.6 billion. The stock jumped to $78.66 before the markets opened in New York. Abbott dropped 5 percent to $41.65 in early trading, while Alere rose 3.5 percent to $44.35. The acquisition will further reshape Abbott, which split off its brand name pharmaceutical business to AbbVie ( ABBV ) in 2013. Since then, the company has shied away from major acquisitions and pursued many smaller deals, even as the CEO talked often about his desire for larger purchases. Abbott has cash on hand, obtained by selling its generic drug business for medicines marketed in Europe and the developed world to Mylan ( MYL ).

Valeant’s Latest Acquisition Target: Perrigo’s CEO?

Shares of Valeant Pharmaceuticals International ( VRX ) rose sharply and fellow specialty drugmaker Perrigo ’s ( PRGO ) fell Friday on reports that the former is about to hire away the latter’s CEO. Late Thursday, the Wall Street Journal quoted anonymous sources saying that Valeant is hiring Joseph Papa if it can get Perrigo’s board to void a noncompete clause in his contract. On Friday morning, Perrigo issued a brief statement saying that it would not comment on “speculation,” which is the only official word from either company so far. Valeant has been hunting for a new CEO since March 21, when activist investor William Ackman moved to the board and tried to order the company’s growing chaos. The stock lost more than 80% of its value since a scandal related to a pharmacy partner broke last September, forcing Valeant to strike a new distribution deal with Walgreen Boots Alliance ( WBA ) that was accompanied by across-the-board price cuts. A disastrous Q4 report and guidance cut, along with an internal investigation that accused former CFO and current board member Howard Schiller of misconduct, eventually turned even bullish analysts against Valeant’s management. Papa, meanwhile, has run Perrigo for 10 years and has a largely successful track record. Under his watch, the company’s revenue has more than tripled, the stock has climbed eightfold, an inversion deal moved headquarters to low-tax Dublin, and Mylan ( MYL ) attempted a hostile takeover that Perrigo successfully fought off. IBD Take: Perrigo was once a hot stock, but not lately. Learn why in IBD Stock Checkup Perrigo’s once-steady profit growth has gotten uneven in the last couple of years, however, and the stock has declined more than 40% since its Mylan-induced high last April. It currently holds a mediocre IBD Composite Rating of 40. This change has led some analysts to worry about the implications of Papa’s departure for Perrigo. “Papa has become the face of Perrigo during his long tenure as CEO,” wrote Jefferies analyst David Steinberg in a research note. “However, with the exception of CFO Judy Brown, the company’s other executives — including John Hendrickson, who was appointed President in Oct. 2015 — are largely unfamiliar to the investment community. “Further, the timing couldn’t have been more inopportune. Mr. Papa is potentially departing prior to the announcement of Q1 results, and this follows a string of difficult quarterly financials — particularly in the company’s flagship consumer business.” Guggenheim analyst Louise Chen agreed, noting that Perrigo is widely expected to miss Q1 estimates and lower its guidance. “There has been debate about senior management change at Perrigo, but we don’t think the Street was thinking that it would actually happen or be this soon,” Chen wrote. Perrigo stock was down 5.8% in late-afternoon trading on the stock market today , near 121, after hitting its lowest level intraday since August 2013. Valeant stock was up 7.7%, near 36.

Sucampo Q4 Beats Estimates, Affirms Guidance, Driving Up Stock

Sucampo Pharmaceuticals ( SCMP ) popped to a two-month high Tuesday after its Q4 earnings beat estimates. Sucampo said it made 43 cents a share in the quarter, excluding one-time items, up 108% from the year-earlier quarter. That beat analysts’ consensus of 19 cents, according to Thomson Reuters. On a GAAP basis, Sucampo made 23 cents a share. Sales climbed 47% to $55.4 million, about $13 million above consensus. For the full year, Sucampo made 95 cents a share, up 136% from 2014, while revenue rose 33% to $153.2 million. For the current year, the company affirmed its previous guidance of 97 cents to $1.07 in EPS on sales of $195 million to $205 million. Sucampo stock jumped almost 15% in early trading to 16, its highest point since Jan. 5, but closed up just 4.3% at 14.54. The company’s lead drug Amitiza provided most of the revenue, with prescriptions growing 10% over Q4 2014 to 390,228. Sucampo’s income derives from royalties paid by its partners, Takeda in the U.S. and Mylan ( MYL ) in Japan; Sucampo also took a $5 million milestone payment from Mylan in the quarter as part of their partnership. The Q4 results included the acquisition of R-Tech Ueno in December, which gave Sucampo a greater share in Amitiza’s global economics as well as some pipeline products. “The key revenue driver, Amitiza, is doing better than we expected outside the U.S., and even in the U.S. sales remained strong as the end-market sales reported by Takeda for royalty calculation were $102.3 million vs. our estimate of $98.2 million,” wrote UBS analyst Ami Fadia in a research note. “4Q 2015 was the first reported quarter that included the R-Tech deal and we are starting to see the improvement in earnings we were expecting from this deal.” Guggenheim analyst Louise Chen lowered her 2016 earnings estimate slightly due to the guidance, but said several factors could provide upside this year: M&A, data readouts on some pipeline products this year, and new formulations and indications for Amitiza, which is currently used for constipation. She estimated that Sucampo has the financial capacity to make a buyout in the $400 million to $500 million range.