Horizon Pharma to Buy Vidara, Shares Rise - Analyst Blog

Horizon Pharma, Inc. HZNP announced that it will acquire Ireland-based privately-held specialty pharmaceutical company, Vidara Therapeutics International Ltd. through a reverse merger. The stock and cash transaction is valued at approximately $660 million and is expected to close in mid-2014. Investors reacted positively to the news with the stock rising 9.13%.

 

Terms of the Deal

 

Horizon Pharma and Vidara will combine to form a new company, Horizon Pharma plc with headquarters in Ireland. Post closure, Horizon Pharma and Vidara shareholders would own approximately 74% and 26% of the merged entity, respectively. The combined company will be listed in the U.S.

 

How Does Horizon Pharma Gain? 

 

We are positive on this agreement. The addition of Actimmune will be a perfect fit for Horizon Pharma's portfolio which includes Duexis, Vimovo and Rayos. 

 

Vidara markets Actimmune, which is used in children and adults with chronic granulomatous disease (CGD) and severe, malignant osteopetrosis (SMO). The product is also indicated for reducing the frequency and severity of serious infections associated with CGD and for delaying time to disease progression in patients with SMO. Vidara recorded Actimmune revenues of $58.9 million in 2013. We note that Horizon Pharma also plans to evaluate Actimmune for additional indications. 

 

The proposed deal will significantly increase Horizon Pharma's revenue base. While Horizon Pharma recorded revenues of $74 million in 2013, the combined company is expected to generate pro forma 2014 revenues in the range of $250 million to 265 million. The acquisition of Vidara will also be accretive to Horizon Pharma's pro forma earnings in 2014.

 

Additionally, Horizon Pharma plc will enjoy a lower tax rate, which is expected to be in the low twenties. This compares favorably with a tax rate in the high thirties expected for the legacy Horizon Pharma.

 

Horizon Pharma carries a Zacks Rank #2 (Buy). Investors may also consider other stocks including Salix Pharmaceuticals Ltd. SLXP, Shire SHPG and Alexion Pharmaceuticals, Inc. ALXN. All the three carry a Zacks Rank #1 (Strong Buy).