What Are Raptor Pharmaceutical Corp. (NASDAQ:RPTP) Shareholders Getting In The Horizon Pharma Deal

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Raptor Pharmaceutical Corp. (NASDAQ:RPTP) is selling to Horizon Pharma PLC (NASDAQ:HZNP) for about $800 million. Horizon is looking up to the deal to strengthen its position in the rare disease market as it seeks to break reliance on primary care products.

The acquisition of Raptor will add to the portfolio of Horizon a number of drugs that treat rare diseases such as lung infections and metabolic disorders.

21% premium

Horizon is paying $9 for a share of Raptor Pharmaceutical Corp. (NASDAQ:RPTP), which is a 21% premium over the stock’s closing price on the last trading day before the deal was announced.

Favorable asset valuation

In the acquisition of Raptor, Horizon can be seen taking advantage of the low relatively low valuation of life sciences assets. Last year, valuation of such assets was lofty, barring potential acquirers from making a move, but those who delayed their acquisitions last year can now grab valuable assets at a great valuation and that is what Horizon can be seen doing.

Horizon’s CEO, Tim Walbert, has recently appeared to favor buying growth, especially in trying to reduce dependence on primary care medicines, which are struggling with pricing pressure. Drugs that treat rare diseases still enjoy strong pricing power and can be a great source of long-term profits also given their strong patent protection.

Horizon will raise debt of $675 million to fund a portion of the Raptor Pharmaceutical Corp. (NASDAQ:RPTP) buyout. The company expects the deal to close in 4Q2016.

Raptor is expected to provide immediate revenue boost to Horizon. In 2015, Raptor generated revenue of $94.2 million. For 2016, Raptor had earlier said it was expecting revenue in the band of $125 to $135 million. Raptor’s drug called Procysbi is approved in the U.S. to treat a rare metabolic disorder. The company’s other drug is Quinsair, which is approved in Canada and Europe to treat chronic pulmonary infections.

Before launching a bid for Raptor Pharmaceutical Corp. (NASDAQ:RPTP), Horizon had earlier this year acquired Crealta Holdings, paying $510 million for the deal and adding to its portfolio a range of products for primary care and rare diseases.

But last year, Horizon launched an unsuccessful bid for Depomed Inc (NASDAQ:DEPO).

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