The most waited acquisition will not happen this week because of short week and other considerations. HZNP is already in recovery mode by itself. However, the chance of announcing an acquisition by next week is very high based on what HZNP indicated before but negotiation for new acquisitions may take longer.
Horizon had targeted a few acquisitions but with DEPO out of the way, the appetite for a larger one seems to be more possible. This is one possibility for delaying the announcement. If a large one then it may be involved with a combination of cash and stock but only cash for smaller ones. HZNP needs to see its PPS as high as possible if new acquisition involves stock transition.
Based on what we know, HZNP may target two areas; one is orphan and the next is pain control drugs. HZNP strategy was to get into pain control and that was the reason for targeting Cambia and then Nucynta and eventually DEPO. This strategy may be changed but if HZNP still interested in pain control then ENDP and PURDUE are two companies that have some assets in this field. This strategy makes HZNP a direct competitor of DEPO. If HZNP acquires large assets in pain control then with better financial and marketing, it may become a serious competitor of DEPO.
On the other hand, HZNP wants to get in orphan drugs which are more stable instead of controversial pain drugs.
One way or another, we will see more excitements in next few weeks.
Public companies use “Mark-to-Market” accounting.
Mark-to-Market or fair value accounting has been a part of Generally Accepted Accounting Principles (GAAP) which can change values on the balance sheet as market conditions change.
Now, HZNP has followed above accounting in Q3, 2015 and calculated their value in its GAAP report. That is the reason HZNP cash position did not reflect full income from Q3 2015 and GAAP earnings was low.
To see details, from the message board go back to HZNP yahoo financial and select Balance Sheet under Financial. Make sure you select Quarterly data on the top.
Under Current Assets, you see Long Term Investment as: Q3 = $42.413m, Q2 = 0, Q1 = 0.
$42.413m is added for DEPO shares which calculated to be $18.85 per share. This was fair value of the shares at the end of the quarter (Q3) and HZNP will calculate their value for Q4 again, unless they are sold. So, DEPO shares affect the GAAP earnings and that was one reason for low GAAP income in Q3, but it will not affect NON-GAAP which HZNP and some other companies report.
If DEPO share price is different from $18.85 at December 31 this year then the gain or loss will be reflected in HZNP GAAP earnings but no affect on NON-GAAP.
phil, be honest with yourself.
May be you did not see the relief some shareholders got after each HZNP CC.
May be yesterday's news was a non-event or negative news for you but it was the best news that I wish for since HZNP took the immediate action which is equal to an acquisition.
I was opposed to deal from beginning and you can check my reasoning in my past posts.
I put one of my post here and I am not going to drag this childish argument anymore.
May be HZNP should think twice about DEPO acquisition
by med_investor • Nov 5, 2015 10:48 PM Remove
Not only VRX model has bad reputation but also it does not work anymore.
It is not time to buy something (a drug or company) at high price thinking that price hike will compensate for it.
DEPO price is expensive and put pressure on HZNP financially.
HZNP has to dilute over 80m shares plus taking about $500m of debt. The reward is not great.
ENDP and VRX have been punished for their high debt recently. With consistent and stable income, high debt may be ok but when business becomes volatile then debt becomes a serious problem.
After all, getting in drug development is not a bad idea.
HZNP can put money in some small companies which have promising drug development.
So 8 buy ratings and an average $40 target.
What are we doing in low $20?
Hang in there for the gain... success may be just beyond the storm. It's worth it!
I was expecting an excited week. Did it happen?
Acquisition was one of the items for excitement which did not happen in this week.
It is reasonable to say that JZNP was waiting to see the direction of DEPO deal before further action. It was a wise choice by HZNP. Acquisition will be something that we will be excited about again in coming week or weeks. We are up over 12% in this week and if this not excitement then I don't know what to say.
Yes, I am looking at HZNP long term too but it does not prevent me to get excited when my portfolio goes up 12% in one week.
Good luck to all longs and remember that patience will pay off.
We took the first step but there are 1000 miles left in our journey.
****how do you know an acquisition "will happen"?*****
That's a crystal ball that nobody has.
However, you can put some past events together, follow the trend and get your conclusion.
First, it has been over a few months that HZNP been talking about it and repeating it.
Second, when HZNP says at least one acquisition but may be two before the year end, I conclude that final talk of one acquisition has been completed and second one is in final stages.
Third, tender extension is similar to first one when HZNP energized shareholders with stellar report on Nov 6.
Forth, regardless of ES, DEPO and other events, HZNP has planned this acquisition months ago but some circumstances delayed it so far. Now, there is no better time than this week to announce one and then explains it in coming CCs on Wednesday and Thursday.
There are a few other potential events that I do not want to speculate at this time.
That is True. I left out the CCs
CCs will dig in HZNP future and give more clear picture.
I am convinced that HZNP may announce an acquisition before CCs.
It will be an interesting and positive week for HZNP.
Three events will happen:
1- On Tuesday, 11/17, we will hear about LC lawsuit against ES. I think result will be positive in favor the LC. It will be out of common sense to be otherwise since a large company is trying to bully a small private company with some baseless and untrue statements.
2- On Thursday, 11/19, we hear about DEPO poison pill, where HZNP is challenging it in the court. Whatever result will be, HZNP shareholders will be happy to end it and put it behind them. Any uncertainty in the market has negative effect and this was a case for both DEPO and HZNP.
3- Finally, HZNP will announce at least one acquisition. I think it will be very positive and will compensate for any ES effect. This has been delayed in past few weeks because of circumstances but HZNP needs to announce it to energize its shareholders again. It will have a very positive effect. Last time, when HZNP extended the tender from Nov 6 to Nov 20, it came with stellar earnings and outlook but ES created panic and deterred shareholders attention. However, this new tender extension has a purpose and HZNP wants to play another ace to convince DEPO shareholders with its bright future.
A large company is killing competitors and small companies by pushing them out of business thru power and size it acquired in past few years.
Sentiment: Strong Sell
What is wrong with ES picture?
It is a burden and it does produce any product that help patients.
One reason for drugs become more expensive is because of ES expenses.
ES survives based on taking away from patients, manufacturers and insurance companies in name of saving for patients. Many small companies can do better job with less overhead.
AS ES shareholders demand, the company increases its benefit by squeezing small companies out of business. ES does not compete but it is taking advantage of its size and domination.
Yes Mr. Cash_King, there is a Master Plan that some investors are not paying attention.
Last Monday, the management revealed part of the plan. The plan did not take in account many micro events that will happen during the journey that may have positive or negative impacts. ES action is one of the negative ones but as these weaknesses come to surface, the company builds vaccine to prevent them in future. It is not all negative but there will be many positive events too like recent earnings and all near future acquisitions and EU approval. Some investors are stuck in these micro events and they are worry about losing pennies while they are forgetting about dollars that they will earn in future.
Over 50% of a company success, especially in this field, depends on the management. HZNP has this quality and it can create a lot of value for its shareholders.
Bottom line is that the shareholders should see the forest for the trees.
So at current estimate of $229m revenue for Q4 2015, 5% translate to
$229m * 5% = $11.45m revenue
And then this translates to $11.45 * %35 = $4.0m profit
And $4.0m profit / 160m shares = $.02 per share for Q4 2015
However, it takes only a few weeks and at most 1 month for HZNP to switch to other specialty pharmacies to handle Linden Care job. So, divide it by 3 for 3 months and effect is only 1 penny per share for Q4 2015.
There is high probability that court will rule in favor of Linden since it has not done anything wrong. At least, court gives the pharmacy a few months to adjust since ES cannot kill other businesses immediately with what it has in mind.
Market will be flat or green tomorrow.
We will get a dip but then recover like in past 2 days. We may end up green after all.
This is something that HZNP has dealt with in the past and it is less than 5%. The stock does not drop 10% when less than 5% is affected temporarily.
Sentiment: Strong Buy
ES still has to process Pennsaid and Rayos from other specialty pharmacies. Only Linden was cut.
Basically, less than 5% of Pennnsaid or Rayos.
---A lot of damages---
This is less than 5%. It is not a lot.
After all, HZNP will do it another way so patients get the drug they needed.
So, it may be 1% to 3% at the start and zero after a few weeks,
No one does over 13%.
Linden does 13% and 5% of 13% goes to ES and the rest or 8% goes to others.
"The notion that Linden Care is a so-called "captive pharmacy" of Horizon Pharma is entirely false. At best Express Scripts is being reckless in its allegations and at worse it is intentionally attempting to mislead investors."