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Why Supernus' Acquisition of Adamas Is a Smart Move

By Keith Speights and Brian Orelli, PhD - Oct 21, 2021 at 7:03AM

Key Points

  • Supernus plans to buy Adamas in a deal with an intriguing financial structure.
  • The acquisition will bring Adamas' Parkinson's disease drugs into Supernus' lineup.
  • Supernus anticipates significant cost synergies with the transaction.

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Adamas looks like a good fit for Supernus.

Supernus Pharmaceuticals ( SUPN -1.58% ) recently announced that it's acquiring Adamas Pharmaceuticals ( ADMS ). In this Motley Fool Live video recorded on Oct. 13, Motley Fool contributors Keith Speights and Brian Orelli discuss why Supernus' planned acquisition of Adamas is a smart move.

Keith Speights: Let's switch gears a little bit here, Brian, and talk about some recent biotech acquisitions.

On Monday, Supernus Pharmaceuticals, the ticker there is SUPN, announced that it's buying Adamas Pharmaceuticals, ticker there is ADMS. What do you think of the deal, Brian? Is this a smart move or not-so-smart move for Supernus?

Brian Orelli: I think it's a smart move for Supernus. It's a good fit. It diversifies the company away from Trokendi which is approved for migraine and makes up a bulk of its sales. It gets two marketed drugs from Adamas -- Gocovri and Osmolex, which are both for Parkinson's disease. Supernus already sells two other drugs for Parkinson's disease so there's potential for quite a bit of synergies here.

The company estimates that it could be $60 million to $80 million in year one, so that's a substantial savings. Then the deal has an interesting structure. They are paying $8.10 upfront in cash per share.

But then there's a contingent value to CRV for $1 that's tied to the sales of Gocovri. It's $0.50 if the sales reach two different levels by 2024 and 2025. That seems like a long time to wait just for an additional dollar per share, although obviously, it could come a lot earlier than 2024 or 2025. It doesn't really seem to be factored into the share price at close.

When I looked yesterday, it was trading just under $8.10. Basically, the investors had basically discounted that potential for that extra dollar, or at least it's not worth it to bid up above the $8.10 mark.

Speights: That is a really interesting deal structure as you mentioned. But it's always encouraging to see deals like this that do appear to be good fits that the products that the two companies bring together could make the whole be greater than the sum of the parts. We'll see how this works out.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Supernus Pharmaceuticals, Inc. Stock Quote
Supernus Pharmaceuticals, Inc.
SUPN
$29.97 (-1.58%) $0.48
Adamas Pharmaceuticals, Inc. Stock Quote
Adamas Pharmaceuticals, Inc.
ADMS

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