Acorda Skyrockets on $525M Civitas Therapeutics Deal - Analyst Blog

Acorda Therapeutics, Inc. (ACOR) shot up 28.2% after the company announced that it is set to acquire privately-held biopharmaceutical company, Civitas Therapeutics, in a cash transaction worth $525 million (including approximately $35 million that will be used for change-in-control costs). The deal is expected to close in the fourth quarter of 2014.

The acquisition will add Parkinson's disease (PD) candidate, CVT-301 to Acorda's portfolio. CVT-301 is an inhaled dry powder formulation of levodopa, the current standard oral treatment for PD. As per company sources, PD affects approximately 1 million people in the U.S. More than 70% of these patients are treated with levodopa. However, despite treatment, at times PD symptoms re-emerge rapidly, which is referred to as an OFF episode. OFF episodes in people with PD are not adequately addressed by currently available therapies.

CVT-301 will be evaluated in a pivotal phase III study for the treatment of OFF episodes in people with PD, which is scheduled to begin enrollment in early 2015. Subject to positive data from the study, regulatory applications for CVT-301 could be filed by the end of 2016. In its press release, Acorda stated that it expects CVT-301 to generate peak sales of more than $500 million in the U.S. alone. The patient population could be about 350,000 in the U.S.
 
With the Civitas acquisition, Acorda will also gain rights to Civitas' proprietary technology – ARCUS pulmonary delivery and a Chelsea based manufacturing facility with commercial-scale capabilities.

Our Take

We are positive on this deal given Acorda's current dependence on Ampyra for growth. Moreover, the company suffered a regulatory setback earlier this year when the FDA issued a Complete Response Letter for Plumiaz nasal spray for the treatment of patients with epilepsy who experience cluster seizures.

We believe the addition of a late-stage candidate like CVT-301 will give Acorda's neurology pipeline a new lease of life and generate synergies. Apart from CVT-301, the ARCUS pulmonary delivery will also help Acorda with its future pipeline candidates. The deal is expected to be dilutive in the first couple of years but very accretive within the first year of product launch.

Acorda is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the biotech sector include Amgen Inc. (AMGN), Medivation, Inc. (MDVN) and Gilead Sciences Inc. (GILD). All three carry a Zacks Rank #1 (Strong Buy).