Indevus Buyout of Valera to Grow Earnings

From BioHealth Investors

Indevus Pharmaceuticals (IDEV) just announced it was purchasing Valera Pharmaceuticals (VLRX). News of the $120M acquisition sent IDEV down 7%, and pushed VLRX up 60%. VLRX is a much smaller company, with a float of only 4.8M shares.

Indevus’ business model focuses on acquiring and marketing products from other companies, in particular urology products. In essence, this is the model Pfizer and other so-called big-pharma companies are adopting to an increasing extent.

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Indevus receives royalties from Lilly (LLY) for Sarafem, prescribed to treat symptoms associated with pre-mentrual syndrome, and copromotes (with Espirit) Sanctura to treat overactive bladder. In addition, on December 13 they filed a New Drug Application (NDA) for an extended release form of Sanctura. They expect to file early in 2007 a NDA for Nebido to treat male hypogonadism, and have a Phase 2/3 study underway for an agent to prevent STDs, including HIV.

Valera is working on a cool polymer based drug delivery system called Hydron. Basically, Hydron is a flexible polymer that is implanted directly into the body and allows the drug to diffuse out. In theory, it’s possible to design such a device to continuously deliver a drug for years.

Valera also sells Vantas, a 30 X 3.5 mm polymer cylinder that slowly leaches Histrelin acetate, a luteinizing hormone releasing hormone (LHRH), as a treatment for prostrate cancer. The implant is put in non-surgically, and can stay in for up to a year. In July 2006 they submitted a NDA for Supprelin to treat precocious puberty based on the same technology. They also have clinical programs underway to treat drug dependence. Like Indevus, Valera has sales but not profit.

Now, urology doesn’t have the same cachet as does treating cancer or heart disease, but it is medically important. While this may not afford them as much visibility as the Amgen’s (AMGN) of the world, I really like Valera’s drug delivery technology, and think both Valera’s and Indevus’ earnings are set to grow over the next couple of years as more products come online.

On a portfolio note, I’m still holding companies as last mentioned two weeks ago except NPS Pharmaceuticals (NPSP). NPSP has now gone down 13% so I sold and took the loss. I picked up Amylin Pharmaceuticals (AMLN) Jan 08 40 calls (@$6.80) as I think this stock has gone down too far.