Are Auspex Shareholders Getting Enough in the Buyout?

The total transaction will go down for $3.5 billion. This breaks down to $101 per share, and the transaction is expected to close in mid-2015.

A big breakthrough was seen in December when Auspex released topline results on for its Phase 3 studies for SD-809, a treatment for Huntington’s disease. At that time shares jumped about 50% to close at $50.14 on December 17.

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The goal of this acquisition by Teva is to solidify its portfolio for the treatment of neurodegenerative disorders. Or in the words of Erez Vigodman, president and CEO of TEVA:

The acquisition of Auspex is a significant step in strengthening Teva’s leadership position in central nervous system (disorders) and advances us into underserved movement disorder markets.

Teva expects this deal to be accretive to revenue by 2016.

Sterne Agee sees this deal as a stepping stone for Teva, in that further and potentially transformative deals remain on the table. According to the analyst firm, Auspex management reiterated that its priorities for business development remain specialty assets in core therapeutic areas, complex generics and growth markets that support long-term growth.

Looking ahead to the future, Sterne Agee analysts suggest that by completing a deal with cash on hand, Teva maintains a mid-to-high one-times leverage profile, leaving significant capacity or further potentially transformative deals that management indicated they continue to assess.

Sterne Agee has a Buy rating for Teva, with a price target of $65, implying upside of 2.4% from current prices. The highest analyst price target for Teva is $70, implying upside of 10.3%.

Auspex only just completed its first full year as a public company in February. The company debuted on the market with its initial public offering (IPO) priced at $12 per share. Shares entered the market at $15. Compared to the selling price that Teva is offering, shares are currently valued at roughly eight times more than the IPO. It might be safe to say that Auspex shareholders are getting a fair valuation for their shares.

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Shares of Auspex were up almost 42% to $100.50 on Monday afternoon. The stock has a consensus analyst price target of $90.17 and a 52-week trading range of $14.75 to $100.85.

Teva shares were up 2.4%, at $63.46 in a 52-week trading range of $47.36 to $64.08. The consensus price target is $63.74.