The Zacks Analyst Blog Highlights: Toll Brothers, Orexigen Therapeutics, Sanofi, Takeda Pharmaceutical and Actelion

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Nov 08, 2013, 09:30 ET

CHICAGO, Nov. 8, 2013 /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 the Toll Brothers, Inc. (NYSE:TOL-Free Report), Orexigen Therapeutics, Inc. (Nasdaq:OREX-Free Report), Sanofi (NYSE:SNY-Free Report), Takeda Pharmaceutical Company Ltd (OTC:TKPYY-Free Report) and Actelion Ltd. (OTC:ALIOF-Free Report).

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Here are highlights from Thursday's Analyst Blog:

Toll Brothers to Acquire Shapell

On Nov 6, leading U.S. homebuilder, Toll Brothers, Inc. (NYSE:TOL-Free Report) announced a definitive agreement to purchase the homebuilding business of California-based Shapell Industries, Inc. for $1.6 billion; largely boosting its presence in the upscale Californian housing market. On the same day, the company also announced its preliminary results for fourth-quarter fiscal 2013 in a separate press release.

Shapell Acquisition

Shapell is considered as one of the largest privately held home building companies in the California market. Since its launch in 1955, Shapell has established 70,000 homes, a major portion located in the wealthy Northern and Southern Californian markets. Nearly 97.5% of these homes are established in the markets of the San Francisco Bay area, metro Los Angeles, Orange County and Carlsbad, which enjoy strong growth potential.

Following the acquisition, Toll Brothers will gain control over Shapell's entire land portfolio in the California market. It will provide the company an additional 5,200 lots and homes for future sales.Post-acquisition, the company's existing lots will be around 9,200 (owned and controlled) in California.

The transaction is expected to cost around $1.6 billion to Toll Brothers. Out of it, almost $1.035 billion will be funded with the company's existing credit facility while the remaining will be funded by debt and equity financing. Toll Brothers intends to complete the acquisition by 2014-end. The transaction is expected to be accretive to Toll Brothers' earnings in the first year itself.

The takeover is viewed as a significant effort by the company for extending its business in the state, which is both affluent and possesses a strong employment base.

Preliminary Results

In a separate press release, Toll Brothers released preliminary results of revenues, contracts and backlog for fourth-quarter fiscal 2013. The company will report detailed fourth quarter and full-year fiscal 2013 financial results in early December.

Orexigen, Sanofi Ink Deal

Orexigen Therapeutics, Inc. (Nasdaq:OREX-Free Report) entered into a commercial supply agreement with Sanofi (NYSE:SNY-Free Report) for its obesity drug, Contrave, for territories outside North America. As per the terms of the agreement, Sanofi will manufacture Contrave at one of the facilities in France.

In Oct 2013, Orexigen submitted a marketing authorization application to the European Medicines Agency for Contrave with a final decision expected in the second half of 2014. Subject to regulatory approval, the company plans to launch the drug in early 2015. The company is working on ensuring that Contrave is ready for global supply, once approved.

We note that a randomized, double-blind, placebo-controlled Light Study (n = 8,900) is being conducted to assess the risk of major adverse cardiovascular events in overweight and obese subjects treated with Contrave. The company expects data from the Light study to be available for the Committee for Medicinal Products for Human Use Day 120 List of Questions.

Orexigen expects to carry out an interim analysis from the Light Study by early December. The study is being conducted under a Special Protocol Assessment with the U.S. Food and Drug Administration (FDA). Based on the outcome of interim analysis, the company plans to re-submit the new drug application for Contrave to the FDA by the end of this year.

We remind investors that the company had received a complete response letter (CRL) from the FDA in Jan 2011 for Contrave. At the time of issuing the CRL, the FDA had expressed concerns regarding the long-term cardiovascular safety profile of Contrave, and had asked Orexigen to conduct an additional study.

The company has a collaboration agreement with Takeda Pharmaceutical Company Ltd (OTC: TKPYY - Free Report) for the development and commercialization of Contrave in North America.

However, we note that Contrave, once launched, will be a late entrant in the obesity market. Last year, two obesity drugs, Belviq and Qsymia, were approved.

Orexigen carries a Zacks Rank #4 (Sell). At present, companies like Actelion Ltd. (OTC: ALIOF - Free Report) look well-positioned with a Zacks #1 Rank (Strong Buy).

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