What To Keep In Mind As Vitae Pharmaceuticals Inc (NASDAQ:VTAE) Goes To Allergan


Vitae Pharmaceuticals Inc (NASDAQ:VTAE) has agreed to be acquired by Allergan PLC (NYSE:AGN) for $639 million. The acquisition is expected to strengthen Allergan’s position in skincare market, a segment it has recently shown interest to expand in.

The deal values Vitae at $21 a share, which is more than double the stock’s closing price a day before the deal was announced. Investors are clearly excited about Vitae buyout as they have been bidding the stock up from the pre-deal price of $8.10 to more than $20.

Access to psoriasis candidate

Vitae Pharmaceuticals Inc (NASDAQ:VTAE) is a clinical-stage biotechnology company with a number of candidates for skin treatment in its pipeline. The acquisition will add to Allergan’s skincare division a candidate for psoriasis, a condition characterized by scale-like dry patches on the skin that cause the skin to itch. The market for such treatment was valued at about $49 billion last year.

Vitae’s pipeline also includes a candidate for another skin disease known as eczema, also characterized by itchy patches.

Allergan’s CEO Brent Saunders commented that they are pursuing Vitae to boost their dermatology unit. He termed the deal a strategic investment.

It is important to note that Allergan’s buyout of Vitae Pharmaceuticals Inc (NASDAQ:VTAE) is a second-thought move. The company originally showed interest in buying Anacor Pharmaceuticals because of its eczema drug in the works. However, Pfizer Inc. (NYSE:PFE) spoiled the party for Allergan as it offered $4.5 billion to acquire Anacor.

Anacor ahead of Vitae with eczema candidate

Keep in mind that Anacor’s eczema candidate is at a more advanced stage of development compared to that of Vitae. However, Allergan can console itself that it is getting hold of Vitae with its eczema candidate at only a small fraction of what Pfizer paid to grab Anacor. Perhaps something to more to remember is that the eczema candidates being developed by Vitae and Anacor differ in the mechanism of action.

Allergan is hoping to close the acquisition of Vitae in 4Q2016. However, closing of the transaction will depend on whether regulators give it their nod because Vitae shareholders already look excited by the offer.

Vitae Pharmaceuticals Inc (NASDAQ:VTAE) logged EPS loss of $0.37 in 2Q2016, beating the consensus estimate of EPS loss of $0.40.


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