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UPDATE: Deutsche Bank Downgrades Avanir Pharmaceuticals, $17 Buyout Target 'Fair'

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In a mid-day note on Wednesday, Alethia Young of Deutsche Bank downgraded shares of Avanir Pharmaceuticals Inc (NASDAQ: AVNR) to Hold from Buy.

Otsuka Pharmaceuticals announced on Tuesday that it will acquire Avanir for $3.5 billion or $17 per share. Young believes that this represents a “fair” price for Avanir given the risks involving heading in to the end of Ph2 meeting.

“There is a risk of the FDA not allowing Avanir to use the deuterated form of the compound, AVP-786, in Ph3 instead of AVP-923 which was used in Ph3,” Young wrote. “The patent for AVP-786 versus AVP-923 is four years longer in the U.S. (2030 versus 2026) and five years longer ex-U.S. (2028 versus 2023.)”

The analyst also argued, “Avanir used a study design in Ph2, sequential parallel comparison design (SPCD), which is new to the agitation space. SPCD re-randomizes parts of the placebo arm after the study start to lower the placebo effect. Prior to this meeting with the FDA, we do not know what type of study design and endpoints will be required for approval.”

Bottom line, Young believes that AVP-923/786 has the potential to take significant share as the Alzheimer's space is evolving. The analyst adds that Otsuka Pharmaceuticals has “significant experience” with another psychotropic drug that had peak sales of $7.3 billion in 2011.

Latest Ratings for AVNR

DateFirmActionFromTo
Dec 2014DowngradesBuyHold
Nov 2014Initiates Coverage onBuy
Sep 2014UpgradesHoldBuy

View More Analyst Ratings for AVNR
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Posted-In: Alethia Young Alzheimer Deutsche Bank Otsuka PharmaceuticalsAnalyst Color Downgrades Price Target Analyst Ratings

 

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