Medicis Shares Surge 24% On Drug Settlement With Teva Pharmaceuticals


Medicis Pharmaceutical Corp., a dermatological products provider, is up around 24% today on news that it entered a settlement which will enable Teva Pharmaceuticals to produce and sell generic versions of its flagship drug, Solodyn.

Investors made a major turnaround on the heavily shorted stock after the deal was announced late Friday night.

Today RBS, JPMorgan and Piper Jaffray raised their price targets and ratings on the stock.

Investors were pessimistic about its fourth quarter earnings which came out Friday as well. Medicis reported revenues in-line with analyst expectations but the Teva deal is what is sending the stock flying.

  • A JPMorgan analyst wrote he sees an “increasingly favourable risk/reward for Medicis shares with further clarity on the longer term protection of the Solodyn franchise and with potential for further expansion.
  • Teva will have to pay royalties to Medicis to produce 65mg and 115mg strength versions of Solodyn. An RBS analyst estimates that these Teva versions make up 73% of Solodyn sales. Solodyn and the company’s other main acne product made $118.9 million in sales in the fourth quarter.
  • RBS does not think there will be research & development blow-up which some bearish investors are anticipating.
  • A Phase III program, expected to total $25 million, will be spread over an 18-month period and will not impact 2011 R&D by more than $8 million, wrote the RBS analyst in a research note.

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