NEW YORK (TheStreet) -- Horizon Pharma (HZNP) was up Wednesday afternoon on the news that it had acquired Vidara Therapuetics in a reverse merger valued at $660 million in cash and stock. The new company will be called Horizon Pharma plc.
The new company will be organized under Irish law presumably to take advantage of that country's more business friendly tax code.
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As for the details of the merger, "Pursuant to the agreement, Vidara will combine with Horizon Pharma, Inc. with approximately 74 percent of Horizon Pharma plc's ordinary shares to be exchanged for Horizon Pharma, Inc.'s common shares, with Horizon surviving the merger. The shareholders of Vidara will retain approximately 26 percent of Horizon Pharma plc and receive $200 million in cash, subject to certain adjustments."
Horizon Pharma expects the benefits of the merger to be fourfold:
- Accelerated transformation of Horizon to a profitable specialty pharma company;
- Expected pro forma combined, full year 2014 revenues of $250 to $265 million and EBITDA of $65 to $75 million;
- Expanded revenue base to include Horizon Pharma's Duexis, Vimovo and Rayos products marketed in the U.S., Vidara's Actimmune product marketed in the U.S. and Horizon's Lodorta marketed outside the U.S.;
- Tax efficient corporate structure enhanced to support Horizon's organic growth and acquisition strategy.
TheStreet Ratings team rates HORIZON PHARMA INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate HORIZON PHARMA INC (HZNP) 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, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HZNP's very impressive revenue growth greatly exceeded the industry average of 1.5%. Since the same quarter one year prior, revenues leaped by 302.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.65, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, HZNP has a quick ratio of 1.67, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for HORIZON PHARMA INC is currently very high, coming in at 87.30%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of -20.94% is in-line with the industry average.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Pharmaceuticals industry and the overall market, HORIZON PHARMA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: HZNP Ratings Report