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BioDelivery (BDSI) Stock Surges on Buyout Offer From Collegium

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BioDelivery Sciences International, Inc. has signed a definitive agreement with Collegium Pharmaceutical, Inc. (COLL - Free Report) , wherein the latter will acquire the former in an all-cash transaction for approximately $604 million.

Per the agreement terms, Collegium will initiate a tender offer to buy all outstanding shares of BDSI common stock at $5.60 each, representing a premium of 54% to BioDelivery’s closing price on Feb 11. Any shares not tendered during the offer period shall be acquired by Collegium through a second step merger at the same share price.

BioDelivery shares surged 52.8% on Feb 14, following the deal announcement. In fact, the stock has risen 35% in the trailing 12 months against the industry’s 40.5% decline.

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Shares of Collegium Pharmaceutical also gained 13.1% on Feb 14. Yet, the stock has declined 19.8% in the trailing 12 months compared with the industry’s 33.2% decline.

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Currently, BioDelivery has three approved drugs in its portfolio — two pain drugs (Belbuca and Symproic), and one migraine drug (Elyxyb). While both Belbuca and Symproic are actively being marketed by BDSI, Elyxyb is yet to be commercialized and is in the early launch phase.

The deal, if successfully closed, will expand Collegium’s pain portfolio. Collegium’s pain portfolio consists of revenues from two key drugs: Nucynta franchise and Xtampza ER. For the fiscal year ended December 2021, Collegium expects sales from the Nucynta franchise in the range of $200-$205 million and Xtampza ER revenues within $130-$135 million.

Belbuca remains a key contributor to BioDelivery’s top line. For full-year 2021, BDSI expects to generate revenues in the range of $147-$148 million from Belbuca net sales. BDSI expects to report fourth-quarter and full-year results later this month/early next month. Collegium expects Belbuca to act as a second growth driver of its existing pain portfolio, with Symproic acting as a contributor.

Apart from the pain portfolio, the acquisition will also give Collegium the opportunity to enter into the neurology market with Elyxyb.

Collegium expects the deal to not only boost earnings in 2022 and 2023 but also achieve annual run-rate synergies of at least $75 million within 12 months from the closure of the acquisition deal. Overall, Collegium expects the deal to give an impetus to cash flows.

The acquisition deal has been unanimously approved by the board of directors of both the companies. The transaction — which is expected to be completed by the end of first-quarter 2022 — is subject to customary closing conditions and clearance from regulatory authorities.

We note that the deal is being funded by Collegium using a combination of its existing cash-in-hand and secured financing of $650 million from Pharmakon Advisors for a term of four years. As part of the deal, COLL will also pay off the existing dues owed by BioDelivery to Pharmakon.

Zacks Rank & Key Picks

BioDelivery Sciences currently carries a Zacks Rank #3 (Hold) while Collegium Pharmaceutical holds a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the drug/biotech sector include Cara Therapeutics (CARA - Free Report) and Vertex Pharmaceuticals (VRTX - Free Report) . While Cara Therapeutics currently sports a Zacks Rank #1 (Strong Buy), Vertex Pharmaceuticals carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cara Therapeutics’ loss per share estimates for 2022 have narrowed from $1.49 to $1.47 in the past 30 days.

Earnings of Cara Therapeutics beat estimates in three of the last four quarters and missed the mark on one occasion, with the average surprise being 126.9%.

Vertex Pharmaceuticals’ earnings per share estimates for 2022 have increased from $13.39 to $14.33 in the past 30 days. The same for 2023 has risen from $14.10 to $15.31 in the past 30 days. VRTX has risen 8.1% in the past year.

Earnings of Vertex Pharmaceuticals beat estimates in each of the last four quarters, delivering a surprise of 10%, on average.

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