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Depomed Rejected Horizon Pharma's Takeout Bid, But Still Trades As If M&A Is Happening

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Depomed Rejected Horizon Pharma's Takeout Bid, But Still Trades As If M&A Is Happening
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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

DateFirmActionFromTo
Dec 2016PiperJaffrayDowngradesNeutralUnderweight
Nov 2016MizuhoUpgradesNeutralBuy
Nov 2016Cantor FitzgeraldDowngradesBuyHold

View More Analyst Ratings for DEPO
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