Leerink Partners Positive on Horizon Pharma (HZNP) Bid for Depomed (DEPO), Says Sell-Off 'Overdone'

Leerink Partners analyst Jason Gerberry said Horizon Pharma's (NASDAQ: HZNP) offer to acquire Depomed (NASDAQ: DEPO) is a good fit and highly accreative. He views the sell-off in the stock as overdone.

Gerberry commented, "We are publishing our pro forma P&L for HZNP's unsolicited bid on DEPO (NR). The all-stock offer price of $29.25/share represents an enterprise value of $3B, or ~6x EV/S and 18x EV/EBITDA (on 2016 basis). On the surface, the deal looks like a sound transaction for HZNP as (1) valuation falls within comparable range for assets with good patent protection. DEPO's key products have IP runway to 2022-24; (2) synergies -- we est. approx. ~$150m in G&A and tax synergies; & (3) financial flexibility -- all-stock deal would leave HZNP levered ~2.3x and able to pursue additional deals. While the unsolicited, all-stock deal carries a lower odds of success, we continue to remain positive on HZNP as we believe it can either (1) get DEPO done at terms in the ballpark of today's bid; or (2) pursue other options - HZNP has robust M&A pipeline & an est. $1-2B in financial firepower as a stand-alone, in our view."

The firm reiterated an Outperform rating and price target of $37 on HZNP.

For an analyst ratings summary and ratings history on Horizon Pharma click here. For more ratings news on Horizon Pharma click here.

Shares of Horizon Pharma closed at $34.54 yesterday.

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