Healthcare costs are rising at multiples of the rate of inflation. Politicians from Senator Bernie Sanders to Hillary Clinton to President Trump have brought attention to it, and called out suspected price gougers like Valeant (VRX), Gilead (GILD) and Turing Pharmaceuticals.The Senate Special Committee on Aging even completed a study on certain price gougers and made strong recommendations on how to combat them.
That’s what makes Allergan’s (AGN) recent decision to sell its Restasis patents to the St. Regis Mohawk Tribe all the more perplexing. The company was practically begging for a senate investigation. The ploy likely brought attention to Allergan’s near term drug pipeline and the dynamics of the $1.8 billion U.S. dry eye market. Allergan’s Restasis controls 70% of the U.S. dry eye market, while Shire’s (SHPG) Xiidra controls about 20%. Lawmakers and investors might turn their focus on new entrants who could potentially disrupt the market. RegeneRx Biopharmaceuticals (RGRX) could be one of those companies. It recently completed Phase 3 clinical trials for dry eye disease. The upside could be tremendous. Read more:
Senate Investigating Allergan’s Anti-Competitive Patent Sale
The senate investigation Allergan appears to have been begging for could finally here. Wednesday four senators sought an investigation into the sale of Restasis patents to the Indian tribe:
Four U.S. senators have asked the Senate Judiciary Committee to launch an investigation into a deal drugmaker Allergan Plc (AGN.N) struck with a Native American tribe to protect some of its patents from generic challenge, according to a letter seen by Reuters.
Democrats Maggie Hassan, Sherrod Brown, Bob Casey and Richard Blumenthal in the letter to Judiciary Committee Chairman Chuck Grassley and Ranking Member Dianne Feinstein on Wednesday called Allergan’s deal “a blatantly anti-competitive attempt to shield its patents from review and keep drug prices high.”
How far is the senate willing to go to protect consumers from high drug prices? Would the senate consider abrogating the Mohawk Tribe’s sovereign immunity to allow the inter partes review to take place? The longer the patent review is held up the higher the likelihood investors will price in the loss of the patents. That does not bode well for Allergan.
Restasis is 9% of revenue and about 15% of income. Growth is dead, yet Allergan’s $30 billion debt load still needs to be serviced. Shocking The Street believes a ratings downgrade from Moody’s or S&P could be imminent. Would a loss of Restasis hasten such a downgrade? Such an action could cause the stock to trade closer to its $95 sum-of-the parts valuation. Stay tuned …
On Shock Exchange
Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead explains the stock market and U.S. economy through the eyes of the New York Shock Exchange, a financial literacy program Ralph Baker started in 2006 to share his passion for investing and basketball with his 11-year-old son and other boys his age. The book predicts the “pain ahead” for the U.S. economy, the demise of China, the pending stock market crash and social unrest.
Shock Exchange has been trumpeted by President Obama, the Senate Finance Committee and House Ways and Means Committee. However, they conveniently forgot to cite the source. Critics try to make and unmake authors, but the market always decides. The book was also recently added to Trump Syllabus K12, crafted by Dr. Kaye Wise Whitehead of Loyola University Maryland. Shock Exchange is the best book on Wall Street in the past 20 years, and on economics, it may be the most important book since the Great Depression.