If there was a change in HZNP fundamentals then this sharp haircut could stay for a while but since this has been based on noise then it won't stick and HZNP can rebound rapidly at any day.
After all, we will see higher high in next two weeks regardless of market direction.
previous high was $21 and change and next high will be around $24. This process will continue and we will see $30 and higher before the end of the year.
I think $25 can be accomplished just in a few days. There is high possibility that we see $25 in next 2 weeks or at least before October ends. I say it from 2 points of views, one is technical and second pressure from big investors who want to get a piece of this high growth company with innovative marketing before it runs away. Basically, time is in favor of HZNP now. When you have a determined management, the chance of success is very high since most of a company successes are based on management mentality. Steve Jobs stirred AAPL to current mega company and TW can repeat it in the pharma field.
"W" shape recovery confirmed. This is a model that invites most active investors to join HZNP.
Short term, in term of days,HZNP will go to $23 and $24.
Long term, in matter of months and probably a year, HZNP goes to $40 and higher.
In a few years, HZNP may get close to $100.
It is obvious that HZNP is setup for rapid growth and that is the main reason for insisting to acquire DEPO.
DEPO by itself will not have a significant growth in next 3 years because of high debt but HZNP my double or triple its business in next 3 years. One thing that HZNP has started to do is R&D and drug development internally. The new model of business does not depend only on acquisition but both internal development and acquisition. Almost most successful and big name companies in the sector have used this model to succeed.
The puzzle is that why HZNP with so much business superiorities and advantages over other companies in the sector, including DEPO, but still trades below them? Something has to be changed sooner or later. Sooner is better and putting an end to current problems by next few months may be the answer.
I do not think that DEPO stand alone can be compared with new merger with HZNP.
It is in interest of banks to keep DEPO stand alone so they can collect high interest.
And of course, some high paid employees/directors benefit without merging.
Usually, the company that is acquired runs up. It happened to DEPO when it went from mid $20 to $33 but recently came down with other stocks in the sector. Both HZNP and DEPO were affected but HZNP more.
However, HZNP is pursing different ways to get growth.
1- R&D development
3- Excellent marketing and sale thru PME
Now, all HZNP needs is more drugs and it has been planning to do it.
HZNP growth will continue and over $2.5 per share for 2017 is not far away.
Well, the problem is with current DEPO board and if a new board is selected then they will be more open to HZNP and they can negotiate a deal with HZNP.
They transformed this company from a penny stock to what you see now. They took several steps to get to this point and now they have experience, knowledge and money to do it even better and progress faster.
So, do not bother with these micro affects since they will find a way to get to their goal which is making a successful company that benefit its shareholders greatly.
1- SG&A will be reduced significantly which adds to net income
2- Interest payment will be reduced and also give more power to new company to refinance again.
3- Taxes will be reduced.
4- More focused and expanded marketing and sale thru HZNP PME program. PME is a program that can be expanded with more drugs and even other small pharmas can use it by paying HZNP a fee.
5- New diversified company with good income, good balance sheet, good money and more power to expand and also do R&D and develop new drugs.
There have been many examples with HZNP model (acquisition + R&D) and they were successful. One example is SLXP that was acquired around $170 per share. HZNP is going the same route.
Of course DEPO is a good company with potential, the main reason that HZNP in interested to acquire.
Actually, both DEPO and HZNP are good companies with high potential and if they merge then new company will be even better with higher potential.
Look, please go back and read my old posts. I was comparing GILD to HZNP and I was saying that HZNP may go below $20 based on the sector and GILD price when HZNP was flying high over $34.
This is already happened and I am stepping in HZNP. I also was against acquisition since I was holding DEPO but now I think that acquisition benefits both companies and their shareholders.
GILD has done the same thing as HZNP tries to do but at smaller scale. Harvoni goes for about $100k and that is why GILD is rich but GILD management is very greedy and cashing almost every week which I did not like.
HZNP managements were not kidding when they said that they are in talk with 5 companies and they believe 2 acquisition will happen before year end and that is without DEPO.
This is not the first time that HZNP expands its portfolio. HZNP is getting better to find opportunities and the market condition is ripe for next batch of acquisitions.
Although HZNP has suffered over 50% stock drop from its peak because of noises in the sector but these noises will not affect HZNP fundamentals and HZNP is driving forward even stronger.
Well, these are opportunities for all investors, new or old.
I wish HZNP investors stop worrying about DEPO.
Although both companies have some similarities but HZNP is in much better shape because of following
1- Higher income/revenue
2- Lower tax bracket
3- More diversified with different markets
4- Better balance sheet
5- More manageable debt with lower interest rate
6- 6x more cash in hands for new opportunities
7- More growth for future
Although the market puts HZNP at current prices because of a series of short lived events but by next month the story will be much different.
Even if DEPO is not acquired, HZNP will continue to its strategy and gets its goal of a stronger company with higher income which benefit its shareholders and employees.
Remember that HZNP went below $17 in the last doom and gloom and some trades/funds ran the happy train to $21.
However, another doom and gloom came about since yesterday and second batch of weak hands and profit takers stepped out. This is a process that will clean up the stock from weak hands and those with short term goals.
The process makes a W shape recovery. Next stop will be above $23, probably low $24.
HZNP is lower than many other stocks in the sector with much lower income.
The question is will the current situation last? I do not think so.
For DEPO with Nucynta as its growth engine unfortunately there are other 2 factors that will eat up the earnings, one is high interest rate and second is high tax bracket. If it is acquired by HZNP then combined company will ease up those 2 factors and shareholders of both companies benefit the most.
DEPO by itself will struggle to lower its debt which may take years and there will be mot much growth.
For HZNP, DEPO is not the only opportunity but the companies is looking 5 to 6 different opportunities and I am sure it come up with more deals or even better deals to get to its goal.
I was expecting that it runs to $24 and then retrace to $20 before it runs to $28.
However, there are some noised in the sector. The stock will recover eventually but with different time line.
Next high of $24 is still in view for next few weeks or before the year end.
Sure the sector is under attack but noise is blinding some investors.
But logical thinking is to separate good, bad and ugly stocks in the sector based on their valuation, income and growth. This what HZNP is about and at current prices, it has low valuation, run rate PE under 12 and of course a double digit growth. Balance sheet is getting stronger and some acquisitions will be done before the year end which add to its current growth. After all, it is a diversified company with low income tax.
In a long run, the stock will outperform and eventually it will get its right evaluation.
1- HZNP, I guess
2- HZNP friends who want the deal be done
3- Speculative investors who think something will happen and they may get $28 or higher prices for their shares.
4- DEPO friends who want to help DEPO management.
All the sudden, there are demands for DEPO shares.
It won't happen. When was the last time that an issue like this was solved with meetings and gatherings? It interferes with each countries laws.
After all, these are hedge funds creations to ride the waves.
It is funny that Hillary cannot follow the basic rules of being a foreign minster that affect the whole country but she wants to punish a few little guys so she can get the attention. Does price increase for a few drugs are only issues that we should be worry about. How about creating some jobs and not helping banks that sucked the blood out of every one. One of the reason we pay a few times for essentials like foods compare to just 5 years ago while no wage increase in over a decade.