Depomed Rejected Horizon Pharma's Takeout Bid, But Still Trades As If M&A Is Happening
In a report published Thursday, RBC Capital analyst Randall Stanicky downgraded the rating on Depomed Inc (NASDAQ: DEPO) from Outperform to Sector Perform, while raising the price target from $26 to $32. While the company reported strong Q2 results and raised its 2015 guidance, Depomed also formally reject the latest unsolicited stock offer from Horizon Pharma PLC (NASDAQ: HZNP).
Although the risk/reward appears more balanced now, the stock has risen over 98 percent year-to-date. The analyst believes that valuation could be a hurdle for other bidders, limiting upside to the stock.
On the other hand, if Depomed continues as a standalone, the analyst believes that there could be downside risk of 25 percent, adding that "the process could be drawn out as DEPO clearly does not appear to be a willing seller in an equity based deal."
With NUCYNTA scheduled to be re-launched, it would prove to be key to the value. The management sees "bockbuster" potential in the drug till the end of its patent, with 2020 revenue expected at $500 million.
In addition, according to the RBC Capital report, "[T]he company suggested it is actively engaged in discussions to acquire additional products having looked at >60 deals in 1H2015 and that tax inversion opportunities would be on the table."
Latest Ratings for DEPO
|Nov 2016||Cantor Fitzgerald||Downgrades||Buy||Hold|
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