The recent merger between Allergan PLC (NYSE:AGN) and Pfizer is still the talk of the town despite fears that U.S. regulatory bodies will block the deal. Separately, Depomed Inc (NASDAQ:DEPO) is working to kick start sales of its recently acquired pain-killer regimen.

Allergan PLC

Following the mega-merger announcement between pharmaceutical giants Allergan, the maker of Botox, and Pfizer, most known for Lipitor and Viagra, analyst Shibani Malhotra of Nomura reiterates a Buy rating on Allergan with a $350 price target as she points to the long-term potential of the deal. 

The deal will close in the second half of 2016 and the analyst believes that the “potential long-term value of the combined entity remains underappreciated and un-reflected in AGN price.” Malhotra attributes this to several factors, including Allergan’s Irish domicile. The combined company will be incorporated in Ireland, which will “enhance financial flexibility to allow for shareholder friendly capital allocation.” Secondly, the analyst points to Pfizer’s “extensive global footprint” that will help grow Allergan’s brands. She explains, “The growth potential from leveraging Pfizer’s far reaching global footprint and leading market positions remains underappreciated, in our view.” Specifically, the analyst sees growth opportunity in Asia for Allergan’s ophthalmology products and Europe as fertile ground for its Gastroenterology products.

Lastly, the analyst comments, “key management from Allergan plans to stay at Newco which should enhance the sharing of cross firm best practices and potentially provide for improved execution.” Many are concerned that the merger will be blocked by U.S. regulatory bodies, but Malhotra is confident that it the deal will close. The analyst explains, “This merger is not technically structured as an inversion, but even if the US attempted to consider it as such, Allergan’s anticipated 44% Newco ownership and close timing reduce the risk that potential regulatory action could impact the financial benefits of the deal.”

According to TipRanks, Malhotra has a 100% success rate recommending Allergan with a +34% average return per rating. As of this writing, all 14 analysts who have rated the stock in the last three months are bullish on the company with an average 12-month price target of $367.71, marking a nearly 17% potential upside from current levels.

Depomed Inc

In a weekly update, Scott Henry of Roth Capital reiterated a Buy rating on Depomed with a $24 price target due to the company’s Nucynta franchise. Overall, Henry views the product as “the primary fundamental focus for DEPO investors.”

Depomed acquired the rights to the Nucynta in January 2015 from Janssen Pharmaceuticals for $1.05 billion. Nucynta is an opioid-based pain treatment and classified as a Schedule 2 controlled substance by the DEA. The drug comes in two regimes: short-acting or twice per day. Henry notes that the short acting regime has 10,548 prescriptions, marking a 2.1% year-over-year decrease. The analyst explains, “DEPO did not actively manage Nucynta until June 2015. We target comps to improve as DEPO increases marketing of the product with flat-to-modest prescription growth by 1H16.”

The long-acting regimen has 6,944 total prescriptions, marking an 18.4% year-over-year increase. Like the short-acting regimen, Henry notes that Depomed did not “actively manage” the regimen until June 2015, so he expects sales to increase. On the whole, Henry believes “Flattish trends are accelerating in 4Q15 (combined with upped pricing), and we view the current week’s data as in-line with expectations.”

According to TipRanks, Henry has a 44% success rate recommending stocks with a +11.7% average return per rating. As of this writing, 4 of the 5 analysts who have rated the company in the last 3 months are bullish while one remains on the sidelines. The average 12-month price target between these 5 analysts is $29.40, marking a 50% potential upside from current levels.

DEPO Consensus