Perrigo Company (PRGO), Elan Corporation, plc (ADR) (ELN): Is This Acquisition a Game Changer?

Other players in the game

Actavis Inc (NYSE:ACT) is a key competitor of Perrigo. The company recently received approval from the FDA for its Lamotrigine Orally Disintegrating tablets for the treatment of epilepsy and bipolar disorder. These tablets relieve moderate to severe chronic pain in adults. The medicine will be on the market quite soon. The company may also get market exclusivity for 180 days. It is generically the same as GlaxoSmithKline’s Lamictal ODT. It has a current market of $51 million, as per data released by IMS Health data.

The company has also received an approval for Oxymorphone Hydrochloride extended-release tablets for the treatment of moderate to severe pain in opioid patients. Opanatablets have a U.S. market of nearly $461 million, according to IMS Health data.

Last month, Health Canada approved Actavis Inc (NYSE:ACT)’s application to sell FIBRISTAL for the relief of moderate to severe signs and symptoms of uterine fibroids in adult women of reproductive age. The breakthrough oral treatment provides a new option for Canada females with uterine fibroids. It is the first approved medication to reduce fibroid size and control symptoms. This will boost the revenue of Actavis Inc (NYSE:ACT) as it reaps the first mover advantage. This will also increase the company’s worldwide market share.

Conclusion

Tysabri is expected to add immensely to Perrigo Company (NYSE:PRGO)’s existing pipeline, as it is a valuable product with attractive margins. This will guarantee a healthy return to shareholders, as it is patent protected until 2024. Based on the 20% dividend pass through policy for Tysabri, the expected dividend in 2013 will be $0.22 per share and will rise to 0.82 per share by 2016, at a growth rate of 55%. In the light of the market dynamics, I would recommend buying this stock.

In the light of the regulatory approvals recently received by Actavis for some of its medicine and its entry into the therapeutic area is likely to increase its revenue multiple folds in the coming years. Hence, I would advise buying the stock.

The article Is This Acquisition a Game Changer? originally appeared on Fool.com and is written by Awais Iqbal.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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