Clovis Upgraded At Credit Suisse Following Acquisition Rumor

Clovis Oncology Inc CLVS is a potential takeout target for a global pharma company, Credit Suisse’s Kennen MacKay said in a report. He upgraded the rating on the company from Neutral to Outperform, while raising the price target from $19 to $41.

Following the FDA’s acceptance of Clovis’ rucaparib NDA in 3L g/sBRCA treatment, data at the forthcoming ESMO conference would offer greater insight into rucaparib’s competitive profile versus Lynparza and efficacy in platinum resistant/refractory patients, analyst MacKay mentioned.
 

Potential Acquisition

“We have conducted an acquisition scenario analysis for parties that have expressed interest in acquiring US oncology companies,” MacKay commented. He named the following companies among others as being potential buyers:

• Eli Lilly and Co LLY
• Merck & Co., Inc.MRK
• Takeda Pharmaceutical Co Ltd TKPYY

The analyst added that Clovis could be worth $35-$41 per share on operational synergies, and $52-$55 per share with leveraged tax benefits.

“Our base-case M&A DCF assumes a -50% cut to CLVS R&D, -50% cut to CLVS SG&A, no change to CLVS COGS, a 35% tax rate, and a 10% increase in product sales. We view this as a conservative M&A valuation, given an acquirer could potentially see tax synergies and further increases to product sales,” MacKay wrote. He added that currently M&A potential outweighs concerns.

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