The red-hot health care sector has excited the merger and acquisition (M&A) market so far in 2015. Companies are consolidating their efforts and pipelines to pull in even more revenue. Celgene Corp. (NASDAQ: CELG) is getting in on the action with its most recent acquisition of Receptos Inc. (NASDAQ: RCPT), and investors and analysts alike are taking to this move very positively.
Both companies announced Tuesday that they had signed a definitive agreement in which Celgene will acquire Receptos. Under the terms of the agreement, Celgene is to pay $232 per share, or roughly $7.2 billion in total.
The acquisition of Receptos significantly enhances Celgene’s Inflammation & Immunology (I&I) portfolio and further diversifies the company’s revenue beginning in 2019 and beyond. Apart from this, the acquisition builds upon Celgene’s growing expertise in inflammatory bowel disease (IBD).
A key component of the transaction is that it will add ozanimod, a novel, potential best-in-class, oral, once-daily, selective sphingosine 1-phosphate 1 and 5 receptor modulator (S1P) to Celgene’s pipeline of potential disease-altering medicines and investigational compounds.
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Bob Hugin, chairman and CEO of Celgene, commented on the acquisition:
The Receptos acquisition provides a transformational opportunity for Celgene to impact multiple therapeutic areas. This acquisition enhances our I&I portfolio and allows us to leverage the investments made in our global organization to accelerate our growth in the medium and long-term.
One thing that really stands out in this transaction in particular is that Celgene will pay a $7.2 billion to acquire Receptos, and as a result Celgene’s market cap increases by roughly $9 billion — a reaction like this is totally unheard of.
After this transaction was announced, a few analysts weighed in on Celgene:
- BMO Capital Markets moved its price target up to $191 from $163.
- Deutsche Bank has a Buy rating and moved its price target up to $175 from $160.
- RBC has an Outperform rating and moved its price target up to $150 from $135.
Piper Jaffray called the deal “the largest and most aggressive” of Celgene’s recent moves. At the same time, Leerink sees “strategic and operational fit.”
Merrill Lynch reiterated a Buy rating with a $146 price target. According to the firm:
Management estimates combined peak sales of $4 to $6 billion. Data from trials suggested a differentiated safety profile for ozanimod. Acquisition plays strategic role in diversification.
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Shares of Celgene were up 9.0% at $133.94 on Wednesday. The stock has a consensus analyst price target of $136.89 and a 52-week trading range of $82.90 to $135.98.
Receptos shares were up 10.3% to $228.42, in a 52-week trading range of $33.52 to $229.44. The consensus price target is $223.50.
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