In a Dec. 11 research note, analyst Jeffrey Cohen reported that Aytu BioScience Inc. (AYTU:NASDAQ) signed a definitive agreement to acquire Neos Therapeutics in an all-stock transaction.
"We are encouraged by the merger as it demonstrates Aytu's commitment to capitalize on strategic mergers and acquisitions opportunities to drive topline results and commercialization efforts," Cohen wrote.
Additionally, Ladenburg Thalmann raised its target price on Aytu to $17.20 per share from $1.75 to reflect the 1-for-10 reverse stock split the pharmaceutical firm effected on Dec. 9, 2020. Aytu's current share price is $6.56.
He described Neos as a specialty pharmaceutical company with two attention deficit hyperactivity disorder (ADHD) drugs on the market: Adzenys XR-ODT and Cotempla XR-ODT. The company commercially launched Adzenys in 2016, Cotempla in 2017 and Adzenys Extended Release in 2019. Neos' extended release platform is proprietary and patented.
"Neos' products have outpaced growth in the ADHD market and continue to demonstrate growth of 9.9% for Adzenys and 6.5% for Cotempla," added Cohen.
The analyst provided the specifics of the acquisition, valued at about $44.9 million. For every share of Neos common stock, Aytu will issue to Neos 0.1088 of a share of Aytu common stock. Upon closing of the deal, estimated to be in Q2/21, Neos shareholders will own about 30% of the combined company on a fully diluted basis.
As for future management, current Aytu CEO Josh Disbrow will remain as CEO of the combined company. The eight-member board will include six Aytu and two Neos directors.
Ladenburg Thalmann updated its Aytu model to reflect the transaction, Cohen noted. In addition to increasing its target price, it boosted FY21 revenue to $60.9 million from $55 million and FY22 revenue to $101.1 million from $64.9 million. "We have also improved our bottom line to now reflect net loss for FY-2021, 2022, and 2023 of $17.8 million, $12.2 million and $5.5 million, respectively," Cohen noted.
The investment bank's rating on Aytu is Buy.
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Disclosures from Ladenburg Thalmann, Aytu BioScience Inc., December 11, 2020
ANALYST CERTIFICATION: I, Jeffrey S. Cohen, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report, provided, however, that:
The research analyst primarily responsible for the preparation of this research report has or will receive compensation based upon various factors, including the volume of trading at the firm in the subject security, as well as the firm’s total revenues, a portion of which is generated by investment banking activities.
COMPANY SPECIFIC DISCLOSURES:
Ladenburg Thalmann & Co. Inc. makes a market in Aytu BioScience, Inc..
Ladenburg Thalmann & Co. Inc. intends to seek compensation for investment banking and/or advisory services from Aytu BioScience, Inc. within the next 3 months.
Ladenburg Thalmann & Co. Inc had an investment banking relationship with Aytu BioScience, Inc. within the last 12 months.
Ladenburg Thalmann & Co Inc. acted in an advisory capacity for Aytu BioScience, Inc. in the last 12 months.
