This morning, Merus announced it had closed a previously announced bought-deal financing for $27,075,000. The proceeds will be used to buy the rights to the Surgestone, Provames, Speciafoldine and Tredemine pharmaceutical products in France for a 22.5 million euros.
Walewicz says this is another strategic deal at a reasonable valuation. He notes that the current revenue run rate of the products is about €6.3 million/year, with an EBITDA margin of nearly 60 per cent, implying an acquisition multiple of ~6x projected EBITDA. The analyst says the acquisition gets the thumbs up from him.
“This is a great transaction for Merus –the transaction multiple was reasonable, it further diversifies the business (going from eight to twelve products), and now shows investors (and other potential partners) that Merus can do deals “beyond Novartis” (i.e. Enablex/Emselex, Sintrom, Estraderm/Salagen deals),” says Walewicz.
In a research update to clients today, Walewicz resumed coverage of Merus Labs with a “Buy” rating and one-year target price of $3.50, implying a return of 90.2 per cent at the time of publication.
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