SunTrust On Jazz’s Celator Purchase: ‘Makes Strategic, Financial Sense’

Courtesy of Benzinga.

SunTrust said Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ: JAZZ)’s $1.5 billion/$30.25 a share acquisition of Celator Pharmaceuticals Inc (NASDAQ: CPXX) makes “strategic & financial sense.”

“Strategically, it leverages Jazz’s Hem/Onc infrastructure by adding Vyxeos, a late-stage asset granted Breakthrough/ Orphan designations in AML (Acute Myeloid Leukemia),” analyst John Boris wrote in a note.

Further, it reduces Jazz’s dependence on Xyrem from 63 percent of sales to 51 percent of sales by 2022.

In addition, the acquisition provides Vyxeos label expansion opportunities into 1st-line AML along with other hematological cancers such as high risk-myelodysplastic syndrome (HR-MDS). The analyst said this represents an upside to his $700 million US+EU peak sales estimate.

“Our NEWCO model assumes the deal is accretive in 2018E (consistent with JAZZ’s projection) with ROIC of 11% in 2020E & 18% in ’21E, easily clearing its WACC,” Boris said.

Meanwhile, Boris said Jazz may not have done with deals yet as he thinks the company still has enough financial flexibility to pursue additional transactions in the $1 billion – $2 billion range in the near term.

The analyst maintained its Buy rating on Jazz Pharma raised his price target to $210 from $200, assuming Jazz trades at 15.5x his NEWCO ’17 EPS estimate of $13.57.

Posted-In: John Boris SunTurstAnalyst Color News Price Target Reiteration M&A Analyst Ratings