Analyst Knocks High-Profile Biotech Merger Battle; Opportunities Elsewhere
Three companies locked in a high-profile bidding battle each got merely average marks from an analyst Wednesday, who launched coverage on a raft of players in the sector.
Raymond James' Elliot Wilbur initiated coverage on 10 biotechnology stocks Wednesday, with half rated Outperform or higher.
Teva still wants to buy Mylan after its $40 billion bid got rejected. Mylan in turn got its $32.7 billion bid for Perrigo turned away recently.
"Bigger isn't necessarily better," Wilbur said of Teva, where he cited a "no-growth regime" through 2017, and likely continued resistance from Mylan to a combination.
Wilbur called Mylan "fairly valued" and its bid for Perrigo too high.
Given Teva's track record with previous acquisitions, "Mylan shareholders would be better off sticking with incumbent management," Wilbur said.
As for Perrigo, its shares "look increasingly rich" and a Mylan deal offers "insufficient rationale" for Perrigo investors.
Wilbur also marked a Market Perform rating on Endo International plc - Ordinary Shares (NASDAQ: ENDP), citing its current valuation and "optimistic" expectations.
Other investment opportunities in the sector may attract less attention but prove more attractive, according to Wilbur.
At Amphastar, Wilbur expects to see a "major profitability inflection" in 2018.
Wilbur, who introduced a $23 target on Amphastar, and also cited its pipeline of 21 product candidates and its integrated manufacturing operations.
As for Sagent, Wilbur said the company "could emerge as one of the strongest organic growth stories in the group over the next two to three years."
Sagent is "one key product or one potential tuck-in acquisition away from a meaningful inflection in earnings," according to Wilbur, who issued a $21 target on the company.
The lone company on Wilbur's list with an Underperform rating: Impax Laboratories Inc (NASDAQ: IPXL).
Impax's 50 percent stock price run-up in the year so far "implies sustained earnings of $2 a share," according to Wilbur, who said achieving this would require "near-perfect" execution.
Impax is in the midst of integrating its $700 million acquisition of Tower Holdings Inc., completed in March, and is burdened by regulatory troubles at its manufacturing plant in Hayward, California, Wilbur said.
Actavis is "a top-tier 'growth pharma' company," according to Wilbur, "with best-in-class brand assets," according to the analyst. WIlbur initiated a $344 target on Actavis.
At Akorn, Wilbur likes the company's pipeline of 87 products, more than 60 percent of which have been on file with regulators for more than 24 months.
"This implies potential for a better-than-average approval cadence," said Wilbur, who initiated a $53 target on the company.
Lannett has some 20 filings seeking regulatory approval approval, with drug candidates targeting $2.8 billion in branded sales, according to Wilbur, who put a $63 target on the company.
Latest Ratings for TEVA
|Jan 2017||JP Morgan||Downgrades||Overweight||Neutral|
|Nov 2016||Morgan Stanley||Downgrades||Overweight||Equal-Weight|
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