BioCryst (BCRX) & Idera (IDRA) Announce Merger, Shares Fall

BioCryst Pharmaceuticals, Inc. BCRX and Idera Pharmaceuticals, Inc. IDRA announced that they have entered into a definitive merger agreement. The merged entity will focus on development and commercialization of drugs to treat rare diseases.

The new company will be led by Idera’s chief executive officer (“CEO”), Vincent Milano. BioCryst’s chairman, Robert Ingram, will chair the board of the combined entity.

The deal has been approved by the board of both the companies.

Both stocks declined (Idera was down almost 15%) on Jan 22, raising concerns about the prospects of the merger, which still awaits shareholders’ approval.

BioCryst’s shares have declined 14.9% in the past year while the Zacks Drugs industry increased 16.1%.

Idera’s shares have increased 48.7% compared with the Zacks Biomedical and Genetics industry’s gain of 8.9% in that period.

 

Per the terms of the all-stock deal, BioCryst’s shareholders will receive one stock of the combined entity for every two shares they own while Idera’s shareholders will receive one stock against five of theirs. Following the completion of the deal, BioCryst shareholders will hold 51.6% stake in the new company while Idera stockholders will own 48.4%.

The transaction is expected to be completed in the second quarter of 2018.

Both the companies expect this merger to bring cost synergies, which is expected to boost the bottom line of the new company.

Moreover, the combined company will have a robust pipeline including two phase III and two phase II pipeline candidates. The phase III candidates are BioCryst’s BCX7353 (Hereditary Angioedema; capsule formulation) and Idera’s IMO-2125 (in combination with Bristol-Myers’ BMY Yervoy for PD1-refractory melanoma). Both the candidates enjoy orphan drug designation.

The phase II candidates are Idera’s IMO-8400 (dermatomyositis) and BioCryst’s liquid formulation of BCX7353.

Several data readouts are expected from these studies in 2018, which will act as catalyst for the new company.

Moreover, the combined entity will have a cash balance of $243 million, which will be enough to support the ongoing studies, commercialization activities upon potential approval and continued business development activities.

Zacks Rank & Stock to Consider

BioCryst and Idera carry a Zacks Rank #3 (Hold).

Exelixis, Inc. EXEL is a better-ranked stock in the pharma sector, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Exelixis’ earnings estimates have remained stable at 49 cents for 2017 and increased from 72 cents to 73 cents for 2018 in the last 60 days. The company delivered a positive earnings surprise in all the trailing four quarters with an average beat of 572.92%. The stock has returned 58.9% in the past year.

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