UCB to Acquire Zogenix; ZGNX Shares Surge 66%

Shares of Zogenix (NASDAQ: ZGNX) surged over 66% during the pre-market trading session on January 19, after UCB (Euronext: UCB) inked a deal to acquire Zogenix for $1.9 billion (€1.7 billion).

Zogenix, Inc. is a global biopharmaceutical company engaged in the development and commercialization of therapies for rare diseases.

Following the news, shares of the Belgium-based multinational biopharmaceutical company, UCB gained around 3% during the pre-market trading hours.

Synergies from the Deal

The addition of Zogenix will complement UCB’s existing therapeutic offerings and enhance the clinical development of a pipeline of epilepsy and rare disease therapies.

Further, the combination of UCB’s deep expertise, experience, and global capabilities with Zogenix will maximize the reach and impact of the treatment for as many patients as possible, who are suffering from specific or rare forms of epilepsy.

Most importantly, the deal will add FINTEPLA, an approved medicine for life-threatening, rare infant- and childhood-onset epilepsy, to UCB’s existing product line.

FINTEPLA has already been approved by the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA). Furthermore, it is under regulatory review in Japan for the treatment of seizures associated with Dravet syndrome in patients of two years of age and above.

Moreover, Zogenix is also pursuing indications for the use of FINTEPLA in the treatment of seizures associated with additional rare epilepsies.

The deal is expected to immediately boost the revenue growth and is expected to be accretive to UCB’s earnings from 2023 onwards.

Deal Price: 72% premium to Zogenix shares

According to the terms of the deal, UCB will pay $26 in cash for every share of Zogenix. In addition, UCB will pay another milestone-based contingent value of $2 per share subject to the EU approval of FINTEPLA, as an orphan medicine for the treatment of Lennox-Gastaut syndrome (LGS) by December 31, 2023.

Based on the 30-day volume-weighted average closing price of Zogenix before signing the deal, the upfront payment implies a 72% premium to Zogenix shares.

The acquisition is expected to close by the end of the second quarter of 2022, subject to certain regulatory approvals.

Management Weighs In

Charl van Zyl, EVP of Neurology & Head of Europe/International Markets at UCB, commented, “The proposed acquisition of Zogenix reinforces UCB’s sustainable patient value strategy and continued commitment to addressing unmet needs of people living with epilepsy with an increasing focus on those living with specific or rare forms of epilepsy, where few options exist.”

Wall Street’s Take

Overall, consensus among analysts is a Strong Buy based on 7 Buys and 1 Hold. At the time of writing, the average Zogenix price target was $34.17, which implies upside potential of 118.5% from current levels.

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