These acquisitions include Bausch & Lomb, Obagi and Medicis Pharmaceuticals. Medicis was primarily bought for its facial aesthetic portfolio and Solta has a pretty significant presence in this space, making it an interesting target for Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
The board has already lost trust of shareholders and Voce Capital has a pretty good record of convincing boards which are not focusing on shareholder interests. In case of successful acquisition, the valuations of Solta will soar and provide significant upside for investors.
Healthcare
Keryx Biopharmaceuticals (NASDAQ:KERX) is a biotechnology company involved in acquiring, developing and commercializing treatments for the renal diseases. Its primary candidate is Zerenex, which has completed Phase III trials. Zerenex is an oral compound with the ability to bind phosphate in the gastrointestinal tract, which helps in treatment of renal diseases. The drug is also in Phase II trials for the treatment of anemic patients with serum phosphorus and iron deficiency.
In January, Keryx Biopharmaceuticals (NASDAQ:KERX) released data from Phase III trials of Zerenex. The market reacted positively to the released information and valuations of Keryx Biopharmaceuticals (NASDAQ:KERX) soared from approximately $3.5 to above $9. The released data showed that Zerenex had met all the primary endpoints of the study. The trials measured the Serum Phosphate levels in subject taking Zerenex and the results shows that they had well maintained levels with 4.90 mg/dL at the end of the 4-week efficacy period and 5.1 mg/dL at baseline. As compared to other competitors already available on the market, Zerenex requires less intravenous iron supplementation and ESAs (erythropoietin stimulators).
The valuations of Keryx Biopharmaceuticals (NASDAQ:KERX) have already appreciated by a mammoth 344% in the last 52-weeks. In the last six months institutions have increased their Keryx Biopharmaceuticals (NASDAQ:KERX) holdings by a mammoth 35%, adding 30 million shares to their portfolios. Despite the recent appreciations, the company is still trading at a 36% discount to the mean sell side target price of $13.2. 10 sell side analysts have a buy recommendation for Keryx Biopharmaceuticals (NASDAQ:KERX).
The patent cliff has increased the attractiveness of companies like Keryx. Big pharmaceuticals are acquiring promising biotechnology companies to supplement their expiring patents. Keryx will submit its NDA by August and there is a high probability that Zerenex will get FDA approval. Despite the January valuations hike, there is still more juice in Keryx. The company is an attractive acquisition target for healthcare giant suffering from the patent cliff.
Bottom line
Solta Medical’s board is trying to stop any attempts at the acquiring the company. However, Voce Capital is fighting the board to put interests of the shareholders first. It seems highly likely that the board will have to give in to pressure from shareholders. Keryx has already appreciated over 300%, but there is still a significant upside for investors. There is a highly probability that Zerenex will get FDA approval, which will have a positive impact on valuations.
Mohsin Saeed has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mohsin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 2 Stocks to Buy on Merger Speculation originally appeared on Fool.com is written by Mohsin Saeed.
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