Merus Labs International Inc.’s stock sunk 16 per cent Tuesday carrying out a $140 million deal to purchase the cardiovascular drug portfolio of the Belgium speciality pharma company.
The Toronto-based company saw its shares fall 36 cents to $1.89, even as most analysts raised their price targets and maintained a buy rating around the stock.
While analysts said the deal would be a good move for that pharmaceutical company, an increase in debt to help finance the offer may have worried investors, combined with a broader market sellof for Canadian stocks Tuesday.
“Our preliminary impression is that this is a transformative transaction with strong strategic and financial merits,” said Lennox Gibbs, analyst at TD research.
Gibbs did lower his price target around the company, noting this week’s deal, which adds three new drugs to Merus’ portfolio, materially increases net debt. His new 12-month target around the stock is $4, from a previous call of $4.50. The analyst currently rates the stock a buy.
“We consider Merus to be among the best positioned in its peer group to complete its strategic plan within the next Twelve months,” said Gibbs.
Other analysts also adjusted their outlooks on Merus Tuesday. Canaccord Genuity raised its target to $4.25 from $3 and reaffirmed its buy buy rating. Dundee Capital raised its target to $3.60 from C$3.50 also rating the stock a buy. Finally, Mackie Research raised its target to $2.30 from $1.90 and kept a hold rating on the stock.
