Investors Drive Bentley Higher
Shares in Bentley Pharmaceuticals (BNT) were trading up more than 10% Dec. 22 after it won Food and Drug Administration approval for a generic formulation of Merck's (MRK) blockbuster cholesterol drug Zocor.
The development comes after Zocor's patent expired in June and the 180-day generic manufacturing exclusivity period ended, opening the market to a flood of competition for the blockbuster drug's market. Though the company is an active marketer in Spain, the generic Zocor is the first generic drug Bentley has won approval to manufacture for the American market. In the U.S., Bentley partner Perrigo (PRGO) will market the drug, known generically as simvastatin, in five doses ranging from 5 milligram to 80 mg tablets.
Anticipating the decision, Exeter (N.H.)-based Bentley was manufacturing the drug at its facility in Zaragoza, Spain. The company's other Spanish operations include manufacturing and marketing programs focusing on four medical areas: cardio, gastrointestinal, central nervous system and infectious diseases.
In 2005 the Spanish market for simvastatin brought in $6.7 million in revenues for Bentley in branded and generic product form. With Zocor's blockbuster status, investors evidently think Bentley's entry into the market will pump up the company's bottom line from $10.9 million in 2005 on $97.7 million in revenues.
When a drug like Zocor -- with annual U.S. sales of almost $4.4 billion -- goes off-patent, generics outfits crowd in. Since the terms of the agreement with Perrigo are not disclosed, it's impossible to say exactly how big simvastatin will be for Bentley.
Still it's possible to estimate. Morningstar analyst Brian Laegeler says "a big drug like this is going to get hit on price when a few players enter the market." If Bentley secures 10% of a $500 million market –- itself scarcely more than 10% of Merck's sales -- then splits revenues with Perrigo, Laegeler surmises that the drug could add 10%, or about $5 million, to Bentley's gross profits.
If the arrangement is successful, Bentley and Perrigo could pursue additional partnerships under a similar framework. Bentley's other operations include licensing out its drug delivery technology CPE-215, a way to improve drug absorption, to Auxilium Pharmaceuticals (AUXL) for use in its testosterone replacement therapy Testim.
As a larger company, the impact of simvastatin on Perrigo's stock was less pronounced. On the morning of Dec. 22 it was trading at $17.40 per share, up 0.4%. The company's other businesses include over the counter medicines and nutritional products.