Pfenex Pops 59% On Ligand $513M Buy-Out Deal; Analyst Sees 93% Upside

Ligand Pharmaceuticals has entered into an agreement to buy Pfenex in an all-stock deal for a total consideration of $513 million.

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As part of the deal, Ligand (LGND), a revenue-generating biopharmaceutical company, will buy all outstanding shares of Pfenex at $12 per share in cash for $438 million, which represents a 57% premium to Pfenex’s closing share price on Aug. 10. Pfenex surged 59% to $12.20 in extended market trading on Monday.

In addition, Ligand, will pay $2 per share or $78 million as a Contingent Value Right (CVR) in the event a predefined regulatory milestone is achieved by the end 2021. The deal, which is subject to customary conditions, is expected to close in the fourth quarter.

Pfenex (PFNX) is a development and licensing biotechnology company focused on the production of enzymes, peptides, antibody derivatives and engineered non-natural proteins.

“Pfenex is an ideal strategic, business and cultural fit with Ligand. The acquisition holds potential to have a significantly positive scientific and financial impact on our business in the short and long term,” said Ligand CEO John Higgins. “Pfenex will add an established, proven protein expression platform to Ligand that is highly complementary to our essential, proprietary drug discovery and formulation technologies.”

Ligand expects the deal will be modestly dilutive to 2020 adjusted diluted EPS and will add $0.10 to $0.30 of adjusted diluted EPS accretion in 2021. Thereafter the biopharma company estimates that the transaction will generate “significant” annual adjusted diluted EPS accretion with the current forecast of $0.60 to $0.80 in 2022 and $1.25 to $1.50 in 2023.

Ligand shares have advanced 14% so far this year. What’s more, the $179.75 average analyst price target implies another promising 52% upside potential might be lying ahead over the coming 12 months.

Five-star analyst Joseph Pantginis at H.C. Wainwright last week reiterated a Buy rating on the stock with a $229 price target (93% upside potential), saying that shares continue to be undervalued.

“We highlight that Ligand’s assets, both in-house and from partners, are positively advancing towards the clinic, pivotal inflection points, and may reach a certain investment verdict promptly,” Pantginis wrote in a note to investors. “Ligand continues to deliver on its promise of building future revenue streams and value for shareholders via the advancement of the shots-on-goal business strategy in hand, which includes acquiring healthy and potentially highly valuable companies, and securing key partnerships to collect royalty and milestone payments.”

Overall, the rest of the Street shares Pantginis bullish outlook. The Strong Buy analyst consensus boast 4 unanimous Buy ratings. (See LGND stock analsys on TipRanks)