The Zacks Analyst Blog Highlights: Amylin Pharmaceutical, Bristol-Myers Squibb, Eli Lilly, Express Scripts and Medco Health Solutions

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Mar 30, 2012, 11:39 ET

CHICAGO, March 30, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Amylin Pharmaceutical (Nasdaq: AMLN), Bristol-Myers Squibb (NYSE: BMY), Eli Lilly (NYSE: LLY), Express Scripts Inc. (Nasdaq: ESRX) and Medco Health Solutions, Inc. (NYSE: MHS).

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Here are highlights from Thursday's Analyst Blog:

Amylin Shoots Up on Takeover Rumors

Amylin Pharmaceutical (Nasdaq: AMLN) shares shot up 54.45% on rumors regarding a take-over bid by Bristol-Myers Squibb (NYSE: BMY). According to Bloomberg, which cited unnamed sources, Bristol-Myers had made an offer of $22 per share ($3.5 billion). However, the offer was rejected by Amylin's board of directors last month.

Why Amylin?

Following the termination of Amylin's exenatide agreement with Eli Lilly (NYSE: LLY) in November 2011, Amylin has been considered to be a potential takeover candidate for companies with a focus on diabetes. Amylin's exenatide franchise consists of Byetta and Bydureon (once-weekly exenatide). While Byetta sales have been lagging expectations, Bydureon, which was launched earlier this year in the US, could very well be a blockbuster.

Amylin is currently looking for ex-US partners for the exenatide franchise, which should help maximize the value of the product.

Meanwhile, Bristol-Myers has been pretty active on the acquisition front over the past few quarters. Earlier this year, the company acquired Inhibitex. Other acquisitions in the recent past include Medarex, Inc., ZymoGenetics, Inc., and Amira Pharmaceuticals, Inc.

With Bristol-Myers already having a presence in the diabetes market (Onglyza and Kombiglyze), the Amylin acquisition would make sense. Bristol-Myers is facing a major patent cliff with its lead product, Plavix, slated to lose US exclusivity in May 2012.

Our Take

Amylin could be an attractive takeover target for companies with a focus on the diabetes market. Chances remain that other companies could express an interest in acquiring Amylin and a deal could be sealed in the late 20s.

We currently have a Neutral recommendation on Amylin, which carries a Zacks #3 Rank (short-term "Hold" rating).

Express Scripts, Medco to Merge Next Week

The wait for investors is finally over as Express Scripts Inc. (Nasdaq: ESRX) recently announced that its merger with Medco Health Solutions, Inc. (NYSE: MHS) might close in the week starting April 2, 2012. The merger is subject to satisfaction or waiver of the remaining closing conditions.

In mid-March, Express Scripts and Medco Health had agreed to extend their merger-closing date. According to the Hart-Scott-Rodino Act, the waiting period for the merger expired on March 12, 2012. However, the companies decided to work with the US Federal Trade Commission (FTC) and planned to close the merger by early second quarter 2012.

Express Scripts had agreed to acquire Medco Health in July last year, for $29.1 billion ($71.36 per share) in cash and stock. At the time of announcing the deal, Express Scripts said that Medco Health shareholders will receive $28.80 in cash and 0.81 shares of Express Scripts for each share of Medco Health that they own.

Following the closure of the acquisition, Express Scripts' shareholders will own approximately 59% of the merged entity, with Medco Health's shareholders holding the remaining.

Express Scripts expects to generate $4 billion annually in cash from operations, following the integration of the two companies.

Our View

Currently, we have a Neutral recommendation on Express Scripts. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. We note the acquisition of Medco Health will generate more synergies for the two Pharmacy Benefit Management (PBM) companies, in the form of lower cost of prescription drugs and improved quality of healthcare.

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