Credit Suisse Upgrades Clovis Oncology (CLVS) to Outperform on Takeout Potential
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Credit Suisse upgraded Clovis Oncology (NASDAQ: CLVS) from Neutral to Outperform with a price target of $41.00 (from $19.00).
Analyst Kennen MacKay commented, "We upgrade CLVS to OUTPERFORM from NEUTRAL and increase our target price to $41 from $19. We move our valuation methodology to an M&A DCF from a standard DCF on the potential for CLVS to be a takeout target for a global pharma company, Japanese pharma, or biotech company. Our base-case M&A DCF assumes a -50% cut to CLVS R&D, -50% cut to CLVS SG&A, no change to CLVS COGS, a 35% tax rate, and a 10% increase in product sales. We view this as a conservative M&A valuation, given an acquirer could potentially see tax synergies and further increases to product sales. Following FDA acceptance of CLVS’s rucaparib NDA in 3L g/sBRCA treatment, we continue to await data at ESMO (Oct 7) to get a better sense of rucaparib’s competitive profile vs. Lynparza and efficacy in platinum resistant/refractory patients. We concede potential acquisition outweighs concerns surrounding patent life, limited experience in platinum resistant/refractory patients, and PARPi competition."
The firm conducted an acquisition scenario analysis for parties that have expressed interest in acquiring US oncology companies such as Lilly, Merck, Takeda, and others. The analysis suggests CLVS could be worth $35-$41/sh on operational synergies, and $52-$55/sh with leveraged tax benefits.
Shares of Clovis Oncology closed at $34.83 yesterday.
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