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Analyst Blog

The announcement of Nivalis Therapeutics, Inc.’s (NVLS - Free Report) merger agreement with a privately-held biotechnology company, Alpine Immune Sciences, Inc. failed to excite investors. Nivalis fell more than 10% on Wednesday following the announcement. This all-stock transaction is expected to be completed in the third quarter of 2017. The combined company will focus on inflammation and immuno-oncology.

Nivalis’ share price shows that the company has outperformed the Zacks classified Medical Drugs industry year to date. The stock rose 6.2% compared with the industry’s gain of 0.1%.

Per the agreement, 26% of the combined company will be owned by Nivalis shareholders while Seattle-based Alpine Immune Sciences will own the remaining 74% stake. Nivalis has been valued at $50 million to determine the share exchange ratio. Currently, Nivalis has approximately $44 million in cash whereas an investor syndicate has committed to invest up to $17 million in Alpine prior to the closing of the deal.

Nivalis’ merger with Apline Immuno Sciences is a strategic decision for both the companies. Nivalis was looking for a buyer since January this year, a month after its failed cystic fibrosis treatment trial. Alpine focuses on developing immunotherapies for the blockbuster immuno-oncology market. The merger will help Alpine to access the public market to fund its clinical trials.

Although Alpine will own the intellectual property and rights to Nivalis’ drugs, the strong cash position of the latter is one of the primary reasons for the merger. The combined company is expected to have approximately $90 million in liquid assets, which is enough to fund Alpine’s immune-oncology clinical trials for the next few years.

We note that the combined company will be headed by Mitchell H. Gold, Alpine’s current Executive Chairman and Chief Executive Officer and the shares will be traded on the Nasdaq Global Market as Alpine Immune Sciences, Inc. The merger is now subject to shareholder approvals of both the companies and the satisfaction or waiver of other customary conditions.

Zacks Rank & Key Picks

Nivalis currently carries a Zacks Rank #2 (Buy). Some of the favourably-ranked stocks in the health care sector include Grifols, S.A. (GRFS - Free Report) , Infinity Pharmaceuticals, Inc. (INFI - Free Report) and Corcept Therapeutics Incorporated (CORT - Free Report) . Grifols and Infinity sport a Zacks Rank #1 (Strong Buy) while Corcept carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Grifols' earnings estimates increased 10.5% over the last 60 days. The company’s shares have appreciated 23.3% so far this year.

Shares of Infinity have gained 44.4% this year so far, while the company’s loss estimates for 2017 narrowed almost 6% in the past 60 days.

Corcept’s earnings estimates increased about 4% for 2017 over the last 60 days. Also, the company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 45%. Its share price has increased 38.8% year to date.

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