Depomed (DEPO) Back in Play Amid Recent Chatter; Valuation Remains Below Horizon Offer - Mizuho
- Wall Street rallies as OPEC reaches output deal
- Pier 1 Imports (PIR) Reports In-Line Q2 EPS; Comps Fall 4.3%
- Intra-Cellular Therapies (ITCI) Announces ITI-007 Phase 3 Missed Primary Endpoint in Schizophrenia
- Vertex Pharma (VRTX) Announces FDA Approval for ORKAMBI in Children 6-11; Lowers 2016 ORKAMBI Revenue Outlook
- After-Hours Stock Movers 09/28: (AEGR) (PIR) (GSAT) Higher; (ITCI) (ATNM) (PRGS) Lower (more...)
Get access to the best calls on Wall Street with StreetInsider.com's Ratings Insider Elite. Get your Free Trial here.
Mizuho securities affirms Depomed (Nasdaq: DEPO) at Buy with a price target of $23 following news that the company is seeking a possible sale.
The firm commented,
We had previously modeled a hypothetical takeout price for DEPO of $26 based on a 4.5x EV/sales multiple applied to our FY:17 estimates of $558M. HZNP recently entered an agreement to acquire RPTP, an Orphan company, at a ~6.2x price/sales multiple (based on FY:16 guidance), and if DEPO were acquired a slight discount to this (4-5x), it could fetch somewhere between $24-$31/share, in our view. We note that this is still below last year's $32/share offer from HZNP. DEPO has been a top pick for us due to the compelling takeout thesis in the name, and we reiterate our Buy rating. We will reassess our PT after updating our model for Aug prescription trends.
We like how DEPO mgmt. may have opted to run a process to avoid a contentious shareholder vote to replace its Board later in the year. This initiative should generate an optimal outcome for shareholders, in our view. The timing also suggests to us that the company is nearing a Nucynta/ER legal decision, which will allow prospective buyers to better value the stock. We don't see HZNP as a likely buyer given its RPTP acquisition and its plans to diversify away from primary care. We see additional upside to valuation from DEPO's patent litigation with Purdue, which could entitle DEPO to a retroactive single digit royalty on ~$15B in branded Oxycontin sales.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- UPDATE: Spotify said in Advanced Talks to Acquire SoundCloud - FT (AAPL) (TWTR)
- Private Equity Passing on Chance to Buy 650 Walgreens (WBA) Stores - NYP
- UPDATE: LinkedIn (LNKD) Shares Turn Negative; Complications Seen in EU Over Microsoft Deal - Mlex
Create E-mail Alert Related CategoriesAnalyst Comments, Mergers and Acquisitions, Rumors
Related EntitiesDefinitive Agreement
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!