Xeris Pharmaceuticals, Inc. (XERS) inked a deal to buy Strongbridge Biopharma plc (SBBP) for stock and contingent value rights (CVR), valued at approximately $267 million. Shares of XERS were down 5.8% and closed at $3.27 while shares of SBBP gained 12% to close at $2.70 on May 24.
Xeris is a pharmaceutical company, which develops and commercializes ready-to-use, liquid-stable injectables. Strongbridge operates as a commercial-stage biopharmaceutical company, which focuses on the development and commercialization of therapies for rare diseases.
The deal is expected to close early in the fourth quarter of 2021, subject to certain closing conditions. On completion of the deal, businesses of both the companies will merge to form a new entity named Xeris Biopharma Holdings, Inc. and is expected to trade under the ticker XERS.
Upon closing of the deal, Xeris shareholders will own 60% of the new company, and Strongbridge shareholders will own the remaining 40%. (See Strongbridge Biopharma stock analysis on TipRanks)
Per the terms of the deal, Strongbridge shareholders will receive a fixed exchange ratio of 0.784 shares of the new company in exchange for each share held by them. Based on the closing price of XERS on May 21, this represents approximately $2.72 per Strongbridge share and a 12.9% premium to the closing price of SBBP shares on the same date.
Strongbridge shareholders will also receive 1 non-tradeable CVR for each share owned by them, worth up to an additional $1.00 payable in cash, or the new company’s common stock based on the realization of certain pre-defined triggers.
The newly formed company is expected to generate approximately $50 million in pre-tax synergies by the end of 2022.
Following the announcement of the deal, John H. Johnson, CEO of Strongbridge said, “Strongbridge has made significant progress advancing its portfolio of therapies for rare endocrine and rare neuromuscular diseases with focus, commitment and passion for the patients and physicians that we serve… Our combined pipeline, drug development talent and commercial infrastructure will enable us to accelerate product launches and drive further growth. We look forward to working closely with the Xeris team to unlock the potential value of our combined assets, while providing our shareholders with the opportunity to participate in the success of the combined company.”
Oppenheimer analyst Hartaj Singh assigned a Buy rating to the stock with a price target of $8, which implies 196.3% upside potential to current levels.
Singh believes the deal is a potential win/win for both the companies and stated, “We have been pointing out the high discrepancy between its strong fundamentals and weak sentiment around SBBP, which probably made SBBP a buyout candidate. We believe investors should own this name into the deal close, especially considering the potential update on Keveyis prior to the close.”
Overall, the SBBP stock has a Moderate Buy consensus rating based on 3 Buys and 2 Holds. The average analyst price target of $6.13 implies 127% upside potential from current levels.
TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on SBBP, with 1.3% of investors increasing their exposure to SBBP stock over the past 30 days.