Switzerland-based Alcon will buy glaucoma drug maker Aerie Pharmaceuticals in a $770 million deal that sent the biotech stock flying Tuesday.
Aerie makes Rhopressa and Rocklatan, a pair of treatments meant to relieve eye pressure associated with glaucoma. Once believed to be future blockbusters, the drugs have underperformed initial expectations, Needham analyst Serge Belanger said in a report to clients.
Still, they're on deck to meet guidance for $130 million to $140 million in full-year sales. Alcon also is adding Aerie's experimental treatment for dry eyes. That drug is in final-phase testing and could possibly head to the Food and Drug Administration for review in 2024.
"We believe Aerie has long been exploring potential (mergers and acquisitions) exists for the company since the launch of Rhopressa/Rocklatan failed to meet expectations and financing the commercialization of the slow-growing glaucoma franchise became more challenging," Belanger said. "Those efforts to find a bid likely increased when the original management exited in 2021."
On today's stock market, biotech stock Aerie soared 36% to 15.16.
Biotech Stock Premiums On The Rise
The deal adds to a growing list of biopharma takeovers. Bristol Myers Squibb just finished its buyout of Turning Point Therapeutics. Amgen is buying ChemoCentryx, and Pfizer recently announced its plan to take on Global Blood Therapeutics. Those deals represent premiums of 7%-122%.
Alcon's 37% deal premium may seem like an "underwhelming" figure in comparison, Belanger said. But he noted the deal is actually a 118% premium over Aerie's pre-earnings stock price. Under the terms of the deal, Alcon will pay $15.25 per share of the biotech stock.
Both boards of directors have already blessed the deal. Alcon expects the transaction to close in the fourth quarter and for it to be accretive to core earnings in 2024.
Needham's Belanger doesn't expect any additional bidders to come along. He downgraded the biotech stock to a hold rating.
By IBD Digital metrics, Aerie stock has a Relative Strength Rating of 97. This puts the biotech stock in the top 3% of all stocks in terms of 12-month performance. The biotech industry group ranks third out of 197 industry groups Investor's Business Daily tracks.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
