RBC Capital Downgrades Adams Respiratory

RBC Capital Markets downgraded specialty drug developer Adams Respiratory Therapeutics Inc. on Monday as the stock approaches the $60-per-share buyout price offered by Reckitt Benckiser.

Adams, which makes the expectorant Mucinex and Delsym cough syrup, accepted the $2.3 billion deal last week from the maker of Lysol disinfectant and Woolite detergent. The buyout is expected to close in early 2008.

Analyst Ken Trbovich downgraded the stock to "Sector Perform" from "Outperform" and reaffirmed a $60 price target.

The Reckitt buyout is a 37 percent premium over Adams' closing price of $43.68 prior to the offer, he said, making it considerable based on recent pharmaceutical deals.

Specifically, the deal places a substantial premium on the company's over-the-counter business, he said, comparing it with Johnson & Johnson's move to buy Pfizer's consumer health business and GlaxoSmithKline PLC's move to buy CNS Inc.

"Since Reckitt is financing this deal with its existing cash and credit facilities and the deal has been approved by both boards, the only impediment to our price target of $60 would be a delay in Reckitt's tender offer or a scuttling of the deal," Trbovich said.

Also, Trbovich said there likely won't be any antitrust interference in the deal, given the low overlap of both companies' brands.

Reckitt's U.S. brands include Gaviscon and Clearasil.

Shares of Adams Respiratory fell 36 cents to $59.68 in afternoon trading.