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Entasis (ETTX) Stock Rises on Buyout Offer From Innoviva

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Entasis Therapeutics Holdings Inc. announced that it has signed a definitive merger agreement with Innoviva, Inc. (INVA - Free Report) , wherein the latter will acquire all the outstanding shares it does not own in the former in an all-cash transaction value of $2.20 per share.

Presently, Innoviva holds nearly 60% of the outstanding shares of Entasis common stock. Following acquisition, ETTX’s equity stake will be valued at $113 million. The acquisition price of $2.20 per share represents a premium of 22.2% to ETTX’s closing price on May 23.

Shares of Entasis rose 21.1% on May 23, following the deal announcement. The stock has dipped 0.5% in the year so far compared with the industry’s 24.9% decline.

Though Entasis has no marketed drug in its portfolio, it has a broad novel antibacterial pipeline targeting serious infections caused by multidrug-resistant pathogens. ETTX’s lead candidate is sulbactam-durlobactam (SUL-DUR), which is being developed to treat infections caused by Acinetobacter baumannii. A regulatory filing for SUL-DUR with the FDA to address the given indication is expected by third-quarter 2022.

Another candidate in ETTX’s pipeline is zoliflodacin, which is being developed in an ongoing late-stage study for treating uncomplicated gonorrhea. The third candidate, ETX0282CPDP, is being evaluated in a phase I study for complicated urinary tract infections (cUTIs).

The acquisition, if successfully completed, will expand and diversify Innoviva’s operations beyond royalty revenues. Currently, Innoviva derives its revenues from a portfolio of royalties and other healthcare assets. INVA partnered with GlaxoSmithKline (GSK - Free Report) on a number of respiratory assets.

Per the partnership terms, Innoviva is entitled to receive royalties from GSK on the sales of respiratory drugs like Breo Ellipta, Anoro Ellipta and Trelegy Ellipta. During the first quarter, GSK paid $93.5 million as gross royalty revenues to INVA for the sales made during the first quarter of 2022.

The acquisition deal was unanimously approved by the board of directors of both companies. The transaction, expected to be completed by third-quarter 2022, is subject to customary closing conditions and clearance from the regulatory authorities.

The aforementioned deal price of $2.20 per share is one of the multiple offers made by Innnoviva to acquire the remaining outstanding shares of Entasis. In February this year, Innoviva’s management made an offer of $1.80 per share, which was  revised to $2.00 in March 2022.

Zacks Rank & Stock to Consider

Entasis currently carries a Zacks Rank #4 (Sell).

A better ranked stock in the overall healthcare sector is Alkermes (ALKS - Free Report) , which has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Alkermes’ loss per share estimates for 2022 have narrowed from 10 cents to 3 cents in the past 30 days. Shares of ALKS have risen 26% year to date.

Earnings of Alkermesbeat estimates in each of the last four quarters, the average being 350.5%. In the last reported quarter, Alkermes delivered an earnings surprise of 1,100%.


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