J&J’s Momenta Acquisition a Risky Move, Says Top Analyst
Stock Analysis & Ideas

J&J’s Momenta Acquisition a Risky Move, Says Top Analyst

It was already shaping up to be a good year for investors of Momenta Pharmaceuticals (MNTA). Before Wednesday, the stock was up by an impressive 95% since the turn of the year. However, the excitement reached hysteria levels on Wednesday, and Wall Street euphemistically propped Momenta on its shoulders and took the biotech for a victory lap.

More to the point, shares of Momenta skyrocketed by 69% after news that Johnson & Johnson will acquire the company hit the Street.

In a tidy piece of symmetry, the all-cash deal put Momenta’s value at $6.5 billion, or $52.50 per share, almost exactly the price Momenta shares landed at by the session’s close. The transaction is expected to be completed sometime in 2H20.

Momenta’s experimental antibody, nipocalimab, appears to have acted as the lynchpin to the deal. The drug can potentially be used to treat several autoimmune diseases and is currently in Phase 3 stage for warm autoimmune hemolytic anemia and Phase 2 for hemolytic disease of fetus and newborn and myasthenia gravis.

JNJ believe nipocalimab could bring in sales of over $1 billion annually.

BTIG analyst Thomas Shrader was taken aback by the size of the deal, saying “it is hard to imagine a higher bid.”

The 5-star analyst further added, “We find the deal modestly surprising as we see every one of Momenta’s assets as somewhat tricky to develop and far from “home free”. As a result, we see the change in control as risky as much of Momenta’s manically focused management is unlikely to join the acquirer. The deal also suggests JNJ is entering the IvIg market with M254 – a move slightly away from conventional therapeutics (the drug substance is a mixture of donor-derived antibodies modified to increase activity.”

All in all, Shrader keeps a Neutral (i.e. Hold) rating on Momenta shares. The analyst has no fixed price target in mind. (To watch Shrader’s track record, click here)

Shrader’s colleagues are almost evenly split into two camps when considering Momenta’s prospects. A Moderate Buy consensus rating is based on 4 Buys and 5 Holds. The average price target clocks in at $48.56, and following the run up, implies shares will drop by 7% over the next 12 months. (See Momenta stock-price forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.


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