Shares of Actavis Plc [NYSE:ACT] and Valeant Pharmaceuticals International Inc. [NYSE:VRX] surged 2.05% and 1.09%, respectively, on Thursday after the U.S. Food and Drug Administration (FDA) gave approval for Actavis’ Viberzi (eluxadoline) and Valeant’s Xifaxan (rifaximin) for diarrhea-predominant irritable bowel syndrome (IBS-D), a condition that affects about 28 million people in the United States and Europe and can cause abdominal pain, bloating and diarrhea.

Although both drugs are designed to treat IBS-D, the two drugs act differently. Viberzi has an active ingredient that triggers receptors in the nervous system to reduce bowel contractions. Xifaxan is an antibiotic that fights bacterial infections, only in the intestines. For Actavis, Viberzi is a strategic fit with their Linzess (linaclotide) drug, a prescription medication used in adults to treat irritable bowel syndrome with constipation (IBS-C) and chronic idiopathic constipation (CIC). 

Analysts expect Viberzi to generate U.S. sales of about $450 million by 2020, while peak sales for Xifaxan could top $1 billion, according to Thomson Reuters data. Actavis and Ironwood Pharmaceuticals [NASDAQ: IRWD] are already commercializing Linzess (linaclotide) in the U.S., since December 2012, with fiscal year 2014 net sales of $297 million.

Two weeks ago, Actavis announced its blowout first-quarter ended March 2015 revenues of $4.23 billion, up 59% year-over-year and non-GAAP EPS with ex-items of $4.30 per share, up 23% year-over-year. Wall Street was expecting earnings of $4.05 per share on revenue of $3.84 billion.

Actavis acquired Allergan, the maker of Botox, in November 2014 for $66 billion. Actavis just raised its 2015 guidance estimates of total revenues of between $20.5 to $21.0 billion and a non-GAAP diluted EPS of between $17.00 to $18.50 per share that include its Allergan business. This is compared with analysts' estimates for $17.83 per share on revenues of $21.49 billion. Actavis said it plans to change its corporate name to Allergan. 

From our technical analysis, ACT broke out the symmetrical triangle in August 2014 with the price projection of $271 per share, determined by adding the width at the top of the pattern to the point of breakout. The stock did a confirmed $271 per share level breakout in February and was moving upward in a rising wedge pattern. 

The stock made a breakout attempt in March where ACT hit an all-time high of $317.72 per share before pulling back. ACT made another breakout attempt on Wednesday at around the $304 per share level. In the event of a confirmed rising wedge breakout, the projected price is $376 per share. 

The 12-month target price for ACT on Yahoo Finance is $346.00 per share. Actavis will report its second quarter 2015 earnings on August 3-7. Analysts are expecting earnings of $4.40 per share, up 28.7%, on revenue of $5.72 billion, up 117%.

Disclosure: Long Position ACT in Portfolio. No positions in any of the other companies mentioned.