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Fly News Breaks for December 5, 2019
Dec 5, 2019 | 09:04 EDT
Allakos shares soared yesterday after Bloomberg reported that the company is exploring a sale. William Blair analyst Tim Lugo continues to believe Allakos holds a leading position in the treatment of eosinophilic gastritis and/or eosinophilic gastroenteritis following "impressively clean" data from a Phase II trial in the indication released earlier in the year. He's long viewed antolimab as an attractive asset for an acquirer given the dual mechanism of action incorporating what he believes is best-in-class eosinophil depletion, as well as mast cell inhibitory capacity. However, a potential acquisition post the Phase II data would be earlier than expected, Lugo tells investors in a research note. Ultimately, the analyst views an acquisition of Allakos as a likely "when, not if" discussion "given the large end-markets and clear efficacy to date." While he holds no view on whether the current takeout report will play out in the near term, the analyst sees Novartis' (NVS) acquisition of Medicines Company (MCDO) at a 52% premium over the pre-acquisition rumor share price as a reasonable comp. Considering a list of select recent acquisitions, Lugo sees average takeout premiums in the 65% range. When applied to Allakos's price at yesterday morning's open of $96.19, this would imply a takeout price in the range of $160 per share, or market cap of nearly $8B, says the analyst. The stock closed yesterday up 44% to $137.73. He keeps an Outperform rating on the shares.
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