Depomed (DEPO) Stock Lower as Horizon Pharma Withdraws Takeover Bid

Depomed (DEPO) stock is falling in late-morning trading on Friday, after Horizon Pharma (HZNP) withdrew its acquisition offer following a court ruling.
By Rachel Graf ,

NEW YORK (TheStreet) -- Depomed (DEPO)  stock is down 0.52% to $19.29 in late-morning trading on Friday, after Horizon Pharma (HZNP) ended its months-long bid for the company following a court ruling.

On Thursday, a California court blocked the Dublin-based biopharmaceutical company's bid for Depomed, noting Horizon's alleged use of confidential information.

Horizon Pharma first approached Depomed with an all-stock offer in May, which Depomed rejected, the Wall Street Journal reports. Horizon then went public with a higher bid in July.

Yesterday's court ruling marks the end of Horizon's acquisition offer.

"Ultimately, we strongly believe we have successfully executed our acquisition and commercialization strategy, and Depomed has a bright future as an independent company," Depomed said in a statement. 

Based in Newark, CA, Depomed is a specialty pharmaceutical company focused on pain and other central nervous system conditions.

Separately, TheStreet Ratings team rates DEPOMED INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate DEPOMED INC (DEPO) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DEPO's very impressive revenue growth greatly exceeded the industry average of 3.7%. Since the same quarter one year prior, revenues leaped by 103.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 7146.09% to $48.76 million when compared to the same quarter last year. In addition, DEPOMED INC has also vastly surpassed the industry average cash flow growth rate of -0.70%.
  • The gross profit margin for DEPOMED INC is currently very high, coming in at 81.51%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, DEPO's net profit margin of -11.23% significantly underperformed when compared to the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Pharmaceuticals industry and the overall market on the basis of return on equity, DEPOMED INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Pharmaceuticals industry. The net income has significantly decreased by 282.6% when compared to the same quarter one year ago, falling from $6.46 million to -$11.78 million.
  • You can view the full analysis from the report here: DEPO

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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