Medicis Pharmaceutical Corp. (MRX) recently announced that it has successfully bid for the purchase of Graceway Pharmaceuticals, LLC, at the latter’s bankruptcy auction. The auction was conducted for almost all the US and Canadian pharmaceutical assets of Graceway, which had filed for bankruptcy on September 29, 2011.
According to the terms of the bid, Medicis will pay $455 million to Graceway in return of Graceway’s pharmaceutical product portfolio, consisting of dermatology, respiratory and women’s health specialty products, and certain other assets. While the transaction is subject to customary closing conditions, Medicis expects it be accretive in 2012, and plans to update its guidance on the closure of the deal.
We expect this acquisition to expand Medicis’ commercial product portfolio and also strengthen its pipeline. This transaction will help boost the company’s top-line further which climbed 4.3% to $184.7 million, in the third quarter of 2011. Despite increased revenues, earnings fell 16.1% to 56 cents, owing to higher research and development (R&D) and promotional costs.
For 2011, Medicis expects earnings in the range of $2.33 to $2.39 per share on revenues of $728 to $741 million. The current 2011 Zacks Consensus Estimate of $2.33 lies towards the lower end of the company’s guidance range.
Additionally, for the fourth quarter of 2011, earnings are expected to range from 63 to 69 cents per share on revenues of $187 to $200 million. The Zacks Consensus Estimate of 64 cents for the fourth quarter is at the lower end of the guidance range.
We currently have a Neutral recommendation on Medicis. The stock carries a Zacks #3 Rank (Hold rating) in the short-run.
