Emergent (EBS) to Buy Narcan Maker Adapt Pharma for $735M

Emergent BioSolutions Inc. EBS announced that it has entered into an agreement to acquire the privately held Adapt Pharma, which will add the latter’s Narcan (naloxone hydrochloride) nasal spray to its portfolio, thus expanding the company’s presence in the public health threats market.

The purchase consideration to Adapt Pharma includes an upfront payment of $635 million in cash and Emergent’s common stock plus potential milestone payments of up to $100 million. The transaction is expected to close during the fourth quarter of 2018, subject to customary closing conditions and antitrust regulatory approval.

Shares of Emergent were up 1.3% in after-hours trading on Tuesday. Notably, the stock has rallied 32.4% year to date against the industry’s decline of 4%.

Narcan is the only FDA approved needle-free emergency treatment of known or suspected opioid overdose. The nasal spray hit the United States market in early 2016 after getting the regulatory body’s nod in November 2015. It was also approved in Canada during October 2016.

With this buyout, Emergent aims at boosting and diversifying its product development, adding Adapts pipeline to address opioid overdose treatment by bringing about 50 employees in the United States, Canada and Ireland. The pharma company also plans to spread awareness of this easy-to-administer life-saving treatment.

The deal is expected to generate revenues in the range of $200-$220 million and will be accretive to earnings in 2019. The company also believes that this acquisition along with the recently announced consolidation of PaxVax, will help it achieve or exceed $1 billion of revenues by 2020.

Earlier this month, Emergent signed a contract to purchase PaxVax for an all-cash consideration of $270 million. PaxVax is a specialty vaccine company, focused on developing vaccines against existing and emerging infectious diseases.

We like to remind investors that Emergent’s growth is heavily dependent on its anthrax vaccine BioThrax. The drug recorded sales of $77.6 million in the second quarter of 2018. Apart from BioThrax, Emergent markets smallpox vaccine ACAM2000 and anthrax monoclonal antibody raxibacumab, both of which, were acquired during the fourth quarter of 2017 from Sanofi SNY and GlaxoSmithKline GSK, respectively.

Emergent currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the healthcare sector is Illumina, Inc. ILMN, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Illumina’s earnings estimates have been raised 12.1% for 2018 and 10% for 2019 over the past 60 days. The stock has soared 57.8% so far this year.

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