Horizon Therapeutics jumps 31% as analysts comment on potential deal size
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Ireland-based biotech Horizon Therapeutics (NASDAQ:HZNP) added ~31% pre-market Wednesday as Wall Street reacted to the company's early buyout discussions with pharma giants Amgen (AMGN), Johnson & Johnson (JNJ) and Sanofi (SNY) (OTCPK:SNYNF).
Meanwhile, U.S. biotech Viridian Therapeutics (VRDN), which is advancing a thyroid eye disease candidate called VRDN-001 to rival Horizon's (HZNP) top-selling drug Tepezza, jumped ~16% in reaction to Horizon's (HZNP) deal news.
Commenting on HZNP's deal confirmation, Wells Fargo argued that "this doesn't mean a deal will get done, but we are not incredibly surprised about the interest, given the meaningful discount we think shares currently trade."
A back-of-the-envelope calculation estimated $135 per share fair value for a potential bid, the analysts led by Derek Archila added, reiterating the Overweight rating and with a $118 per share target on the stock.
However, buyout interest in Horizon (HZNP) has surprised Stifel as the firm points to "the transitionary period it is undergoing with Tepezza and the still-unrealized tangible opportunities over the next several years."
The analysts led by Annabel Samimy, reiterate the Buy rating and $138 per share target on the stock, noting that, at a minimum, a potential deal should exceed Horizon's (HZNP) 52-week high of $117 per share.
Bank of America analysts led by Jason Gerberry argue that The Wall Street Journal report indicating a potential valuation of more than $20B implies an 18% premium to the company's trailing 30-day average and 25% below its 52-week high.
Despite facing a key clinical catalyst in Q2 2023 for Tepezza, Horizon (HZNP) will have to encounter competition from developers of drugs with a similar IGF-1R mechanism, such as Viridian (VRDN), while a lead competitor looks to a mid-2025 launch, BofA said.
Meanwhile, BMO Capital Markets argued that based on Irish Takeover Rules, the bidders must disclose whether they intend to make a buyout offer by Jan. 10, 2023, unless the company requests to extend the deadline.
"We believe large biopharma suitors mentioned could all make sense, and could see others also potentially jumping in," the analyst Gary Nachman and the team wrote. They reaffirmed the Outperform rating on Horizon (HZNP) and kept the stock as one of the firm's top picks.
Read: Early this month, Seeking Alpha contributor ONeil Trader termed Horizon (HZNP) "one of the best investments in biotech today."