In pre-market trading, Depomed Inc (NASDAQ:DEPO) shares rose over 15% to $24.49 following a Reuters article indicating that the drug maker may be exploring a sale, and could begin the process after resolution of the Nucynta patent litigation.
Mizuho’s top analyst Irina Rivkind Koffler commented, “We had previously modeled a hypothetical takeout price for DEPO of $26 […] HZNP recently entered an agreement to acquire RPTP, an Orphan company, at a ~6.2x price/sales multiple (based on FY:16 guidance), and if DEPO were acquired a slight discount to this (4-5x), it could fetch somewhere between $24-$31/share, in our view. We note that this is still below last year’s $32/share offer from HZNP. DEPO has been a top pick for us due to the compelling takeout thesis in the name, and we reiterate our Buy rating. We will reassess our PT after updating our model for Aug prescription trends.”
“We like how DEPO mgmt. may have opted to run a process to avoid a contentious shareholder vote to replace its Board later in the year. This initiative should generate an optimal outcome for shareholders, in our view,” the analyst added.
Koffler reiterated a Buy rating on shares of Depomed, with a price target of $23, which implies an upside of 8% from current levels.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, 5-star analyst Irina Rivkind Koffler has a yearly average return of 22.2% and a 59% success rate. Koffler has a 9.8% average return when recommending DEPO, and is ranked #19 out of 4158 analysts.
Out of the 11 analysts polled by TipRanks, 7 rate Depomed stock a Buy, while 4 rate the stock a Hold. With a return potential of 13%, the stock’s consensus target price stands at $24.