Medicis Pharmaceutical Retains Buy Rating At Deutsche Bank

Analysts at Deutsche Bank reiterated Buy rating on the shares of Medicis Pharmaceutical Corp. (NYSE: MRX) with a price target of $40. They state that they were encouraged by Medicis winning the auction for Graceway Pharmaceuticals, which filed for bankruptcy in September 2011 due to excessive $900 million debt load.

DB analysts state that Medicis will pay $455 million for the U.S. and Canadian pharmaceutical assets. It plans to use existing cash, ended FY 2011 Q3 with $820 million to finance the transaction. MRX will receive Graceway's portfolio of dermatology, respiratory disease, and women's health products, which generates approx $125 million in annual sales. The company

is scheduled to pay approximately 3.6x sales, which appears reasonable given multiples for recent acquisitions in dermatology have ranged from 2x-5x and unlike most of these transactions, MRX is also getting an R&D pipeline. Medicis is likely to launch two recently approved Zyclara line extensions. Another key product is Maxair of $31million, but as a CFC product, it is expected to be phased out by late 2013. Medicis also receives several mid to late stage pipeline products with peak annual sales potential over $500 million. Medicis' acquisition of Graceway is a good move for several reasons. First, the portfolio fits very well with MRX's existing dermatology businesses, and secondly diversifies MRX away from Solodyn. Third, analysts believe MRX can grow the Graceway portfolio, unlike other acquisitions they believe MRX passed on of late which might have yielded accretion in year one but with likely stagnant sales afterwards. Fourth, to the extent Solodyn revenues are pressured near-term due to the recently announced managed care contracting strategy, this transaction should more than make up for any potential weakness to the top line.

On a year-to-date basis, Medicis Pharmaceuticals has a share performance of 16.91 percent, and as compared to Standard & Poor'! s, it ha s an YTD share performance of -3.78 percent.

Medicis Pharmaceutical is a specialty pharmaceutical company, which is engaged in the development and marketing of products for the treatment of dermatological and aesthetic conditions in the United States, Canada, and Europe. It has a market capitalization of $1.86 billion with a P/E ratio of 22.13.

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Shares of Medicis fell 2.06 percent, or $0.64, to trade at $30.44.

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