PDL's Offer For Neos Therapeutics Could Be Too Low

PDL's offer comes at a time when Neos still has "much to execute on and much value to be realized" after successfully launching its first product, Adzenys XR-ODT, last year, the analyst wrote. Since then, the company launched its second product earlier this month and has a third product already approved by the U.S. Food and Drug Administration and likely to launch in the beginning of 2018. Neos' three "highly complementary and profitable" products will likely result in the company earning a profit, the analyst said. In addition, Neos' settlement with Actavis removes a potential overhang that could have impacted the stock's performance moving forward. Van Buren maintains an Outperform rating on Neos' stock with an unchanged $20 price target. Related Links: Mid-Day Market Update: Essendant Drops After Q3 Results; Achieve Life Sciences Shares Climb It's A Bad Day For Biotechs

Given the multiple catalysts and removal of headwinds, shares of Neos "will eventually reach $20" as a standalone company, Van Buren wrote. This is justified based on the company's portfolio of three products that will eventually reach $300 million in sales with at least eight years in duration each (see Van Buren's track record here).

Even based on just a 2x multiple on peak sales, the stock would be worth $600 million, or over $20 per share, the analyst said.

"The bottom line is that we agree with Neos' Board," Van Buren wrote. "The offer is nowhere near consideration, and we believe that Neos will continue to be an attractive takeout target for other players in the space (i.e. Shire's Neuroscience business or Supernus)."

At time of publication, shares of Neos were up 36.99 percent at $10.00. Shares of PDL were down 7.34 percent at $2.96.