Three health-care deals today are paying huge premiums

By Philip van Doorn, MarketWatch

Lionel Bonaventure/AFP/Getty Images

Teva extended its acquisition spree on Monday, with an agrement to buy Auspex Pharmaceuticals Inc. for $3.2 billion in cash.

The pace of consolidation in the health-care industry has accelerated, so if you’re holding the right stocks, you’ll benefit from large deal premiums.

There have been $89 billion in health-care mergers and acquisitions so far this year, compared with $56 billion during the first quarter of 2014, according to S&P Capital IQ.

Investors had a full plate of deals on Monday, as a series of health-care transactions, with three featuring hefty premiums, helped send major stock indices soaring. The S&P 500 was up as much as 1.3%. Health care has been, by far, the best-performing sector in recent years.

Horizon Pharma PLC /zigman2/quotes/206690250/composite HZNP -5.14%  said it had agreed to buy Hyperion Therapeutics Inc. for $46 a share in cash, or about $956 million. The premium was 8% from Friday’s close. But with shares of targeted companies typically “in play” in the weeks or months leading up to deal announcements, it’s important to look at the 30-day and 90-day premiums. Hyperion’s 30-day takeout premium was 71% and the 90-day premium was 120%, according to FactSet.

Also on Monday, Teva Pharmaceutical Industries Ltd. /zigman2/quotes/205657894/composite TEVA -2.83%  announced an agrement to buy Auspex Pharmaceuticals Inc. for $101 a share in cash, or roughly $3.2 billion. The takeout price represented a premium of 41% over Friday’s close, a 50% premium to the Feb. 27 close and a 100% premium to the Dec. 30 close.

The third major health-care deal on Monday was UnitedHealth Group Inc.’s /zigman2/quotes/210453738/composite UNH -1.01%  agrement to purchase Catarmaran Corp., which provides prescription-benefits services,  for $61.50 a share, or approximately $12.8 billion. The cash deal represented a premium of 36% over Friday’s close, while the 30-day takeout premium was only 20% and the 90-day premium was even lower, at 15%.

The last deal announced on Monday had a different twist, with Fujifilm Holdings Corp. making a tender offer of $16.50 a share for Cellular Dynamics International Inc. . That’s a 108% premium over the target company’s closing price of $7.94 on Friday. The 30-day premium is 213% and the 90-day premium is 129%, according to FactSet.

Since the beginning of 2014, there have been 39 M&A deals in the Health Technology, Health Services and Life/Health Insurance subsectors, according to FactSet.

Here are the 10 deals that have featured the biggest 30-day premiums:

We excluded Valeant’s January purchase of Dendreon from the list, because the acquired company had declared bankruptcy in September and its stock was nearly worthless.

Here are the 10 deals with the largest 90-day premiums:

None of Monday’s takeout deals were driven by low stock valuations. In all cases, the acquiring companies were either looking to enter a particular business or augment specific product lines.

So taking an approach of identifying the “cheapest” health-care stocks isn’t a good approach if you wish to join investors making killings on M&A deals.

But there are loads of health-care stocks that sell-side analysts expect to soar over the next 12 months.

Among Health Technology, Health Services and Life/Health Insurance stocks in the Nasdaq Composite Index  and/or in the S&P 1500 Composite Index, here are the 10 with the highest 12-month upside potential (based on consensus price targets) that also have majority “buy” ratings from at least three analysts and a closing price on Friday above a dollar:

The list above isn’t for the faint of heart, as all 10 are expected by analysts to show negative earnings per share this year and next.

So here’s another list of potential health-care winners, using the same criteria but limiting the group to companies with positive consensus EPS estimates for fiscal 2015 and 2016, showing the greatest 12-month upside potential based on consensus price targets:

As always, a list like this cannot tell you everything you need to make an investment decision. The next step is to start researching individual companies.

/zigman2/quotes/206690250/composite

Add to watchlist HZNP

Horizon Therapeutics PLC

US : U.S.: Nasdaq

$ 90.57

-4.91 -5.14%

Volume: 3.55M

Feb. 25, 2021 4:00p

P/E Ratio

55.21

Dividend Yield

N/A

Market Cap

$21.39 billion

Rev. per Employee

$1.08M

/zigman2/quotes/205657894/composite

Add to watchlist TEVA

Teva Pharmaceutical Industries Ltd. ADR

US : U.S.: NYSE

$ 11.00

-0.32 -2.83%

Volume: 9.90M

Feb. 25, 2021 4:00p

P/E Ratio

N/A

Dividend Yield

N/A

Market Cap

$12.09 billion

Rev. per Employee

$422,386

/zigman2/quotes/210453738/composite

Add to watchlist UNH

UnitedHealth Group Inc.

US : U.S.: NYSE

$ 328.87

-3.34 -1.01%

Volume: 2.78M

Feb. 25, 2021 4:00p

P/E Ratio

20.52

Dividend Yield

1.52%

Market Cap

$315.21 billion

Rev. per Employee

N/A

/zigman2/quotes/205657894/composite

Add to watchlist TEVA

Teva Pharmaceutical Industries Ltd. ADR

US : U.S.: NYSE

$ 11.00

-0.32 -2.83%

Volume: 9.90M

Feb. 25, 2021 4:00p

P/E Ratio

N/A

Dividend Yield

N/A

Market Cap

$12.09 billion

Rev. per Employee

$422,386

/zigman2/quotes/205040805/delayed

Add to watchlist XE:PHIA

Koninklijke Philips N.V. ADR

XE : Germany: Xetra

€ 45.40

0.00 0.00%

Volume: 0.00

Feb. 25, 2021 5:35p

P/E Ratio

35.06

Dividend Yield

1.86%

Market Cap

€42.24 billion

Rev. per Employee

€239,423

/zigman2/quotes/204317691/composite

Add to watchlist OMI

Owens & Minor Inc.

US : U.S.: NYSE

$ 32.50

-0.36 -1.10%

Volume: 3.30M

Feb. 25, 2021 4:00p

P/E Ratio

85.66

Dividend Yield

0.03%

Market Cap

$2.42 billion

Rev. per Employee

N/A

/zigman2/quotes/205040805/delayed

Add to watchlist XE:PHIA

Koninklijke Philips N.V. ADR

XE : Germany: Xetra

€ 45.40

0.00 0.00%

Volume: 0.00

Feb. 25, 2021 5:35p

P/E Ratio

35.06

Dividend Yield

1.86%

Market Cap

€42.24 billion

Rev. per Employee

€239,423

/zigman2/quotes/207745412/composite

Add to watchlist ENDP

Endo International PLC

US : U.S.: Nasdaq

$ 9.31

-0.56 -5.67%

Volume: 3.28M

Feb. 25, 2021 4:00p

P/E Ratio

N/A

Dividend Yield

N/A

Market Cap

$2.27 billion

Rev. per Employee

$918,778

/zigman2/quotes/202428675/composite

Add to watchlist ABBV

AbbVie Inc.

US : U.S.: NYSE

$ 107.33

-1.36 -1.25%

Volume: 6.24M

Feb. 25, 2021 4:02p

P/E Ratio

37.50

Dividend Yield

4.84%

Market Cap

$191.93 billion

Rev. per Employee

$974,553

/zigman2/quotes/206690250/composite

Add to watchlist HZNP

Horizon Therapeutics PLC

US : U.S.: Nasdaq

$ 90.57

-4.91 -5.14%

Volume: 3.55M

Feb. 25, 2021 4:00p

P/E Ratio

55.21

Dividend Yield

N/A

Market Cap

$21.39 billion

Rev. per Employee

$1.08M

/zigman2/quotes/209481335/delayed

Add to watchlist OTSKY

Otsuka Holdings Co. Ltd. ADR

US : U.S.: OTC

$ 20.35

-0.88 -4.15%

Volume: 37,202

Feb. 25, 2021 3:55p

P/E Ratio

16.18

Dividend Yield

1.74%

Market Cap

$22.63 billion

Rev. per Employee

N/A

/zigman2/quotes/204037183/delayed

Add to watchlist CH:RO

Roche Holding AG Akt

CH : Switzerland: SWX

CHF 305.40

-6.20 -1.99%

Volume: 172,110

Feb. 25, 2021 5:31p

P/E Ratio

18.48

Dividend Yield

2.98%

Market Cap

CHF259.56 billion

Rev. per Employee

CHF574,809

/zigman2/quotes/204037183/delayed

Add to watchlist CH:RO

Roche Holding AG Akt

CH : Switzerland: SWX

CHF 305.40

-6.20 -1.99%

Volume: 172,110

Feb. 25, 2021 5:31p

P/E Ratio

18.48

Dividend Yield

2.98%

Market Cap

CHF259.56 billion

Rev. per Employee

CHF574,809

/zigman2/quotes/206460723/delayed

Add to watchlist CA:FRX

Fennec Pharmaceuticals Inc.

CA : Canada: Toronto

$ 9.66

-0.61 -5.94%

Volume: 1,934

Feb. 25, 2021 5:40p

P/E Ratio

N/A

Dividend Yield

N/A

Market Cap

$265.07 million

Rev. per Employee

N/A

/zigman2/quotes/206690250/composite

Add to watchlist HZNP

Horizon Therapeutics PLC

US : U.S.: Nasdaq

$ 90.57

-4.91 -5.14%

Volume: 3.55M

Feb. 25, 2021 4:00p

P/E Ratio

55.21

Dividend Yield

N/A

Market Cap

$21.39 billion

Rev. per Employee

$1.08M

/zigman2/quotes/202428675/composite

Add to watchlist ABBV

AbbVie Inc.

US : U.S.: NYSE

$ 107.33

-1.36 -1.25%

Volume: 6.24M

Feb. 25, 2021 4:02p

P/E Ratio

37.50

Dividend Yield

4.84%

Market Cap

$191.93 billion

Rev. per Employee

$974,553

/zigman2/quotes/207182558/composite

Add to watchlist PTN

Palatin Technologies Inc.

US : U.S.: NYSE American

$ 0.82

-0.03 -3.86%

Volume: 4.10M

Feb. 25, 2021 8:00p

P/E Ratio

N/A

Dividend Yield

N/A

Market Cap

$196.20 million

Rev. per Employee

$5,899

/zigman2/quotes/205762709/composite

Add to watchlist RPRX

Royalty Pharma PLC

US : U.S.: Nasdaq

$ 47.02

-0.18 -0.38%

Volume: 1.49M

Feb. 25, 2021 4:00p

P/E Ratio

17.89

Dividend Yield

1.45%

Market Cap

$29.51 billion

Rev. per Employee

N/A

/zigman2/quotes/205342310/composite

Add to watchlist ARDX

Ardelyx Inc.

US : U.S.: Nasdaq

$ 6.47

-0.36 -5.27%

Volume: 716,411

Feb. 25, 2021 4:00p

P/E Ratio

N/A

Dividend Yield

N/A

Market Cap

$616.40 million

Rev. per Employee

$60,011

/zigman2/quotes/206417857/composite

Add to watchlist OSUR

OraSure Technologies Inc.

US : U.S.: Nasdaq

$ 10.69

-0.16 -1.47%

Volume: 956,431

Feb. 25, 2021 4:00p

P/E Ratio

N/A

Dividend Yield

N/A

Market Cap

$778.30 million

Rev. per Employee

$327,553

/zigman2/quotes/203273141/composite

Add to watchlist IG

Principal Investment Grade Corporate Active ETF

US : U.S.: NYSE Arca

$ 26.11

-0.38 -1.44%

Volume: 19,603

Feb. 25, 2021 8:00p

/zigman2/quotes/208743423/composite

Add to watchlist RMTI

Rockwell Medical Inc.

US : U.S.: Nasdaq

$ 1.40

-0.09 -6.04%

Volume: 1.24M

Feb. 25, 2021 4:00p

P/E Ratio

N/A

Dividend Yield

N/A

Market Cap

$139.42 million

Rev. per Employee

$205,026

/zigman2/quotes/200443609/composite

Add to watchlist HMSY

HMS Holdings Corp.

US : U.S.: Nasdaq

$ 36.80

-0.03 -0.08%

Volume: 1.06M

Feb. 25, 2021 4:00p

P/E Ratio

60.11

Dividend Yield

N/A

Market Cap

$3.26 billion

Rev. per Employee

$202,063