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.
Consider DEPO shareholders as HZNP shareholders and vice versa.
This deal will be done one way or another.
It was nice if both CEOs sit down and discuss it like mature people instead of using media and courts to challenge each other.
This is a deal that benefit shareholders of both companies the most even though some managements may lose some benefits or even their jobs.
Only one quarter left from 2015 and HZNP is trading at its early 2015 prices.
All 2015 activities and progresses cannot be wiped out in of 2 weeks.
When it was close to $40, it was probably ran ahead of itself. By the same token, now that is sitting in $20s, it is oversold. The same way that $40 was a little bit early to get, $20s also a little bit late to have.
It will go to middle eventually and then it will be depends on business progresses.
Anyway, as I wrote when it was in $16s a few days ago, I predicting that HZNP will go to $24 in a short time and then high $20 or low $30 before the year ends.
From weekly chart
KELT = $19.85 *** $28.89 *** $37.93
**BB = $22.90 *** $28.89 *** $37.93
Chen = $16.22 *** $24.28 *** $32.34
PIVOTS = $15.29 *** $22.25 *** 29.59 *** $43.97
MA(50) = $23.97
Daily MA (200) = $26.08
KAMA = $28.42
lets put it this way.
It has been oversold without any real immediate change in fundamentals.
So, it will get out of the overshoot down conditions which is any price below $19.
Short term = It will go to mid range ($24) before seeing any real resistances.
Mid term = around $29 in a few months.
Long term (one year or more) = around $44 with improving revenue and income.
Before we know anything about Turing and Hillary tweet, HZNP and DEPO started to fight for the deal and HZNP lost over 20% in the process. Is it a big deal if HZNP gains half of that when the deal closes.
It will be a good choice for HZNP to close DEPO deal but if it does not then HZNP goes for its plan B and acquires other deals that has been lined up.
As a matter of the fact, this delay for DEPO acquisition has given HZNP an advantage to find a better and cheaper deals since the sector is going thru a depressed time and more ready for deals.
HZNP can buy 9.9% of DEPO shares at current depressed prices without triggering anything.
They know that baby thrown out with bathwater.
Uncontrolled bots and problematic ETF have done many damages to many good solid pharma and biotech stocks. The sector is way down since speculative stocks with no revenue/income have been mixed with good stocks. Now, add Hillary tweet and other noises around drug prices. A perfect storm was formed which has pushed many stocks to unrealistic prices.
Does a company like HZNP deserves to lose 60% of its value in very short period while there is no changes in fundamental. Yes, if Hillary becomes president and if Demos get majority in both house and senate then after 3 years we see something. After all, does it cost HZNP 60% of its value?
What is the chances for Demos to control everything? very narrow chance but if happens then it takes 3 years to implement anything .
In next 3 years, HZNP probably doubles and triples its revenue/income and then it finds a way to deal with this problem if it ever happens. Who knows, HZNP itself may be acquired by another company in next 3 years.
Fund managers should start to accumulate both HZNP and DEPO. They probably buy DEPO and vote for the acquisition to become HZNP investors. This is one way to erase all their losses from this sector for the year.
When acquisition is announced, both stock may jump over 10%.