Checkmate: Starboard Boots Depomed CEO, Two Board Members

Depomed Inc DEPO and activist investor Starboard Value reached an agreement which will see the drugmaker name a new CEO and add two new members to its board.

Despite the latest developments, analysts at Cantor Fitzgerald aren't ready to name the stock as a buy just yet.

In a report Wednesday, Cantor's Chiara Russo stated that Starboard Value's initial involvement in the stock was M&A related and that remains the case. However, the analyst believes the company "will have to create additional value" in the name before it can pursue any M&A activity.

Weakness In Shares

Russo argued that Depomed's stock could see weakness in the near-term given:

• The "current softness" of the opioid market.
• A realignment and turnover of Depomed's salesforce.
• The Opana ER exit opportunities.
• The need for clarity relating to Depomed's debt refinancing.

Russo said these factors will affect the ability of management to attract a potential acquirer. Also, the company's first quarter revenue guidance of $95 million to $100 million fell short of the $114.6 million analysts were expecting.

Bottom line, Starboard and Depomed will need to create additional value in the name through at least the bottom half of 2017.

Shares of Depomed remain Neutral rated with an unchanged $19 price target.

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