The deals just keep on coming, and there is no reason to think they stop anytime soon. Just this week Horizon Pharmaceutical made an unsolicited offer for Depomed, and a new report from the analysts at RBC makes the case that more industry capital is chasing fewer potential targets.
With larger companies generating outstanding free cash flow, as well as having the ability to add more debt capacity, the RBC team thinks the buyout equation is a simple question of when and not if. They list four companies that are now the highest on their radar for a takeover bid.
The RBC team sees solid growth for this company through 2018. Akorn Inc. (NASDAQ: AKRX) is engaged in the development, manufacture and marketing of multisource and branded pharmaceuticals. In 2013 the company purchased Hi-Tech Pharmaceutical for $640 million in cash. The combination of Akorn and Hi-Tech transformed the niche pharmaceutical company into a larger, more diversified generic player. This combination also brought critical mass and scale to Akorn’s business and has strengthened its position with retail and institutional customers.
Akorn has manufacturing facilities located in Decatur, Ill.; Somerset, N.J.; Amityville, N.Y.; Hettlingen, Switzerland and Paonta Sahib, India, where the company manufactures ophthalmic, injectable and specialty non-sterile pharmaceuticals.
The RBC team points out the overhang from an ongoing 2014 10-K restatement should be settled soon, and that should mark a pick-up in interest. With strong 15% EBITDA compounded annual growth rate projected through 2018, and a very solid pipeline, the company is an attractive target. Possible suitors include Valeant Pharmaceuticals and Perrigo.
The Thomson/First Call consensus price target for the stock is $57.43. Shares closed most recently at $42.42.