There is a new weapon in the war on insomnia, and one which does not appear to have the drug dependence and the nasty side-effects associated with many other sleep aids. Somaxon Pharmaceuticals, Inc. (NASDAQ: SOMX) announced this morning that the FDA has approved the New Drug Application for Silenor as a treatment of insomnia characterized by difficulty with sleep maintenance. Somaxon calls this the “First and Only Prescription Sleep Aid to Provide a Full Night’s Sleep Without Abuse Potential.”
The company said it will focus on seeking a U.S. commercial partnership and will then build a U.S. commercial presence and will prepare to launch Silenor in the second half of 2010.
Silenor binds with high affinity to histamine (H1) receptors, which is believed to be the mechanism to promote the maintenance of sleep. The company noted that this mechanism of action is different from any other prescription medication currently approved for the treatment of insomnia.
- Sanofi Aventis (NYSE: SNY) makes Ambien. Drugs.com noted that Ambien CR was the #43 drug with sales of $865 million. Sepracor Inc. makes LUNESTA, but this company has been acquired. Drugs.com notes that in 2008 Lunesta was the #47 drug with $771 million in sales.
- Sleep maintenance difficulty is defined as waking frequently during the night and/or waking too early and being unable to return to sleep. The company noted that this is the most commonly reported nighttime symptom of insomnia.
Yesterday we noted how some suit filing against Sepracor, Inc. (NASDAQ: SEPR) on behalf of specific investors were being filed in Delaware to block or demand more and better terms in the Dainippon Sumitomo Pharma Co., Ltd. acquisition. Well, now there has been at least one formal class action lawsuit filed on behalf of ALL Sepracor shareholders.
The notice today came from the Law Offices of Howard G. Smith, announcing that a stockholder class action lawsuit has been filed in the Court of Chancery for the State of Delaware on behalf of all public stockholders of Sepracor, Inc. An inquiry from someone involved in the case noted that this specific case was filed by Saxena White.
As with all of these, you know what the allegations are…. that Sepracor and certain of the Company’s directors breached their fiduciary duties to Sepracor stockholders by agreeing to sell the Company to Dainippon Sumitomo Pharma Co., Ltd. at an inadequate and unfair price following a grossly unfair process.
The Complaint alleges that “the $23 per share price significantly undervalues Sepracor and, in entering into the proposed merger, each of the defendants violated and continues to violate applicable law by directly breaching and/or aiding and abetting the remaining defendants’ breaches of their fiduciary duties.”
As far as what those valuations were, we ran these yesterday and the P/E was incredibly low.
JON C. OGG
It is common that when mergers are announced that some shareholders are either unsatisfied or want more. Sepracor Inc. (NASDAQ: SEPR) and its proposed $2.6 billion sale to Dainippon Sumitomo Pharma Co. might not be enough to satisfy everyone involved in the shareholder side of the deal. That is the case if you read a Bloomberg report from Tuesday night and this could be the first of many such suits.
It appears that the allegations are that the terms of the merger are detrimental to shareholders because of a break-up fee and shopping provisions. This is an effort either to block the merger or to secure a higher price and better terms. So here is how the $23.00 stacks up… It was a 27.6% premium to the September 1 price, but was a 48% premium to the 6-month average.
This deal does make-whole anyone who bought shares over the last year. But it comes with a huge hit for many investors who have been in it for the long-term. From the end of 2004 to mid-2007 this was generally a $40 to $60 stock. Then it was a $30 stock and the stock was in the low $20′s to $30 for most of the period from mid-2007 to mid-2008.
If you look at the deal on a valuation basis, it seems very cheap. The Thomson Reuters figures for 2010 are $2.91 EPS and $1.26 billion in revenues for 2009 and $2.99 EPS and $1.31 billion in revenues for 2010. In short, The company is selling for less than 8-times a blended earnings estimate and just over 2-times revenues for a blended time horizon.
Any time a merger is seemingly based upon a 52-week high, it is hard to feel too sorry for investors. At least until you start looking at the multiple of earnings being so low. We screened recently for all of the low P/E stocks in drug and biotech and there are still many other low P/E multiples in there.
We also are putting together another piece right now containing the following stocks as merger candidate discussions:
- Cubist Pharmaceuticals Inc. (NASDAQ: CBST)
- Onyx Pharmaceuticals Inc. (NASDAQ:ONXX)
- Geron Corporation (NASDAQ: GERN)
- Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA)
- Regeneron (NASDAQ: REGN)
- Seattle Genetics Inc. (NASDAQ: SGEN)
- Alnylam (NASDAQ: ALNY)
JON C. OGG
SEPTEMBER 9, 2009
This week came a merger of at least one of the drug and biotech players we expected to occur. That was in Sepracor (NASDAQ: SEPR). We will be putting together a list of much more detailed picks in teh sector this coming week.
Some of these are our own picks which we think should be acquired, and some are current biotech-drug targets which others feel are on deck. To see the full deal on how this related, BioMedReports.com has a full breakdown on teh Spreacor terms and we used this for determining value on some of our other picks….
Among the picks being presented in detail next week are as follows:
Cubist Pharmaceuticals Inc. (NASDAQ: CBST)
Onyx Pharmaceuticals Inc. (NASDAQ:ONXX)
Geron Corporation (NASDAQ: GERN)
Vanda Pharmaceuticals, Inc. (NASDAQ: VNDA)
Regeneron (NASDAQ: REGN)
Seattle Genetics Inc. (NASDAQ: SGEN)
Alnylam (NASDAQ: ALNY)
Have a great weekend and stay tuned for the full details on these and others next week.
JON C. OGG
SEPT. 4, 2009
Sepracor Inc. (Nasdaq: SEPR) has an FDA advisory committee meeting scheduled for tomorrow that begins the abbreviated review process for potentially treating children with its Alvesco asthma drug and Omnaris for allergic rhinitis.
Both are drugs that Sepracor bought from Nycomed last year. Together, they are expected to help the company best known for its Lunesta sleep drug push above half a million dollars in revenue from respiratory products by years’ end.
Neither drug is intended solely for use in children, and no adverse side in children have been reported so far with either of them. It’s why they were chosen for the abbreviated review.
The advisory committe is expected only to review data, and is not scheduled to make a statement of any sort. But no news could be good news, in a process that could help increase the market for two of its newer and more promising products.
These are some of the upgrades and positive calls already being seen in the biotech sector this Thursday morning:
- Amgen (NASDAQ: AMGN) Started as Buy at Deutsche Bank.
- Athersys (NASDAQ: ATHX) started as Buy at Lazard Capital.
- Genentech (NYSE: DNA) Started as Buy By Deutsche Bank.
- Gilead (NASDAQ: GILD) Started as Buy at Deutsche Bank.
- Sepracor (NASDAQ: SEPR) raised to Buy at UBS.
You can see the list of negative calls and downgrades here.
June 19, 2008