Is Sunovion Overpaying for Cynapsus?

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Shares of Cynapsus Therapeutics Inc. (NASDAQ: CYNA) more than doubled on Thursday after it was announced that Sunovion Pharmaceuticals would be acquiring the company. The deal was announced after the markets closed on Wednesday. However in paying this exorbitant price for the stock, the question arises: Is Sunovion overpaying for Cynapsus?

According to the terms of the deal, Sunovion will pay $40.50 per share in an all cash transaction valued at a total $624 million. The transaction is expected to close in the fourth quarter of 2016, but it is still subject to customary closing conditions and regulatory approval.

Through this transaction, Sunovion would acquire Cynapsus’ product candidate, APL-130277, which is designed to be a fast-acting, easy-to-use, on-demand treatment option for managing OFF episodes associated with Parkinson’s disease.

Nobuhiko Tamura, chairman and CEO, Sunovion commented:

The acquisition of Cynapsus is well-aligned with Sunovion’s focus on the innovative application of science and medicine to help people with serious medical conditions and complements our robust product pipeline. We have high regard for the Cynapsus team and their work with the APL-130277 program.

Sunovion is showing how highly it regards the APL-130277 program with its wallet by paying a premium of roughly 123%. Currently APL-130277 is in its Phase 3 clinical trials and as yet has not been approved by the U.S. Food and Drug Administration.

Currently Cynapsus only has a consensus analyst price target of $27.00, which implies an upside of 47% from Wednesday’s close. Even if we look historically on a split-adjusted basis, this stock has only closed above the $20 mark a handful of times. Keep in mind Sunovion is paying more than double this level.

Shareholders for Cynapsus were definitely happy with this payout and the board of directors did unanimously approve this decision. Anthony J. Giovinazzo, president and CEO of Cynapsus, added:

With its leadership in therapies for central nervous system disorders and commercial experience specific to neurology, we believe Sunovion is best suited to advance APL-130277 in the United States and other key markets. This transaction culminates years of dedicated work by the Cynapsus team and represents significant value creation for our securityholders.

Shares of Cynapsus closed Wednesday at $18.36, with a 52-week trading range of $10.54 to $19.47. But shares were changing hands at $39.52 Thursday morning.