Several pharmaceutical companies have been divesting non-core business segments in order to focus on core areas or expertise. A similar announcement was made by UCB (UCBJF) in Nov 2014. However, earlier this week, the company said that it won't be going ahead with its agreement with Advent International and Avista Capital Partners. The companies announced their decision to mutually terminate their deal for the acquisition of UCB’s U.S. specialty generics subsidiary, Kremers Urban Pharmaceuticals Inc.
According to the agreement announced last month, Advent and Avista were supposed to acquire Kremers Urban for $1.525 billion in cash. However, the companies decided to terminate the acquisition due to a conflict in timing and the regulatory process for UCB’s methylphenidate extended-release (ER) tablets.
The FDA has asked the company to conduct an additional bioequivalence study on methylphenidate ER on the basis of a recently issued draft guidance in order to establish its therapeutic equivalence to Johnson & Johnson’s (JNJ) Concerta. The agency also changed the therapeutic rating for methylphenidate ER from AB (products that meet the necessary bioequivalence standards established by the FDA) to BX (implying that although the product is approved and can be prescribed, it cannot be recommended as an automatic substitute for the branded drug) until the additional data is available.
UCB said that it intends to work with the FDA on this matter and perform the additional study as instructed.
We remind investors that had the deal not been terminated, the divestment of Kremers Urban would have gone through in the first quarter of 2015. However, despite the termination of this agreement, UCB’s intention to divest its U.S. specialty generic business remains unchanged. The company continues to expect total revenues for 2014 in the range of €3.15 billion – €3.25 billion and core earnings per share in the range of €1.40 – €1.55.
The potential divestiture of UCB’s specialty generic business will allow the company to focus on its core areas of expertise – neurology and immunology. We expect investor focus to remain on updates on the impending methylphenidate ER study and the company’s plans regarding the divestiture.
Investors looking for well-ranked stocks in the health care sector may consider Lannett Company, Inc. (LCI), Sucampo Pharmaceuticals, Inc. (SCMP) and Valeant Pharmaceuticals International, Inc. (VRX). All these stocks carry a Zacks Rank #1 (Strong Buy).
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