Aytu BioScience (AYTU) and Neos Therapeutics (NEOS) stocks are up 16 percent and 31 percent on March 18 as of 9:35 a.m ET. Both companies’ shareholders are expected to vote on the biopharma tie-up on March 18. What is AYTU’s stock forecast based on its upcoming catalysts?
On December 10, 2020, AYTU and NEOS signed an agreement to combine their businesses. The merger will likely be approved after two independent proxy advisory firms recommended that shareholders approve the transaction.
Why AYTU and NEOS stocks are rising
Shares of AYTU and NEOS are rising on March 18 despite no company-specific news. Investors are responding to the companies' respective special shareholder meetings in relation to the potential merger between AYTU and NEOS. The business combination will likely be approved after two proxy advisory firms, Institutional Shareholder Services and Glass Lewis, both recommended that shareholders approve the transaction.
AYTU and NEOS merger date
On December 10, 2020, AYTU agreed to acquire NEOS in an all-stock transaction. The transaction values NEOS at about $44.9 million. Under the terms of the deal, NEOS stockholders will get 0.1088 shares of AYTU for each share of NEOS that they own. After the deal is complete, NEOS shareholders will own 30 percent of the combined company, while AYTU shareholders will retain the remaining 70 percent interest.
The combined company will operate under Aytu Biopharma and the ticker symbol “AYTU.” Aytu BioScience CEO Josh Disbrow will continue to lead the combined company, while NEOS CEO Jerry McLaughlin will join the entity’s board of directors. The merger deal is expected to close in the second quarter of 2021. It's subject to approval by shareholders and other customary closing conditions.
AYTU’s stock forecast
According to MarketBeat, AYTU stock is covered by just one Wall Street analyst. The analyst has a buy rating with a target price of $3. The target price represents a potential downside of over 73 percent from the current stock price of $11.38.
NEOS’s stock forecast
According to MarketBeat, NEOS stock is also covered by just one Wall Street analyst—JPM Securities. The analyst has a market perform rating on the stock. However, JPM didn’t provide a target price for NEOS stock.
AYTU and NEOS merger synergies and benefits
Investors seem to be viewing the AYTU and NEOS merger deal as a win-win situation for both companies. The combined company will have nearly $100 million in pro forma sales for the 12-month period ending September 30, 2020. The companies expect annualized cost synergies of about $15 million beginning in fiscal 2022, which should accelerate the path to profitability. Also, the combined company will be able to strengthen its footprint in pediatrics and adjacent specialty care segments.
In the press release, the companies’ said, “The combined entity will have an increased footprint in the prescription pediatric market, an established, growing multi-brand ADHD portfolio addressing the $8.5 billion ADHD market and significant combined revenue scale.”