Cantor Fitzgerald upgraded Collegium Pharmaceuticals (NASDAQ:COLL) to “overweight” from “neutral” and raised its price target to $26 from $17, citing its agreement to acquire BioDelivery Sciences International.
Shares of Collegium closed at $19.90, up $2.31, on Feb. 14, while BioDelivery gained $1.92 to close at $5.56.
Analyst Brandon Folkes writes that his upgrade is driven by the diversification in revenue that the acquisition of BioDelivery brings, as well as a footprint in the neurology category. “We believe the diversification of revenue streams and therapeutic focus are both multiple enhancing,” he said.
Post-closing, expected towards the end of the current quarter, Collegium would have five product franchises that it will market: Xtampza, Belbuca, the Nucynta franchise, Symproic and Elyxyb.
Mr. Folkes said the new product portfolio could generate more than $550-million in revenue in 2023, with Collegium forecasting that the transaction would be accretive in 2022 and 2023.
Mr. Folkes said Collegium has guided to achieving more than $75-million in annual synergies, within 12 months of closing. “We believe Collegium will likely be able to extract those synergies fairly quickly post deal close,” he added.
“We believe Collegium should trade at a discount (on a pro forma basis), given the potential generic entries on Nucynta and limited competition on Belbuca later in the decade,” Mr Folkes said.
In addition, he said the opioid pain space has always traded at a discount to its biopharma peers. “That said, the acquisition does diversify the revenue base and provide a foothold in neurology, which should expand the multiple. The combined company should generate meaningful cash to pay down debt, as well as bring in additional assets over time,” he added.
