The benefits and terms of the agreement are outlined in a Ladenburg Thalmann report.
In a Sept. 18 research note, Ladenburg Thalmann analyst Jeffrey Cohen reported that Aytu BioScience Inc. (AYTU:NASDAQ) signed a definitive agreement to acquire Innovus Pharmaceuticals Inc. (INNV:OTCQB) for about $8 million of Aytu common stock.
Figuring the acquisition into its model on Aytu, Ladenburg raised its target price on the specialty pharma to $4.75 per share from $4. Aytu's current share price is about $1.42.
Innovus is a specialty pharmaceutical firm that commercializes, licenses and develops consumer health products, Cohen explained. From its existing portfolio, which encompasses 30 products in the diabetes, men's health, sexual wellness and respiratory health markets, it generated $24 million of revenue during the past four quarters.
Also, the company has a robust sales and marketing platform it developed called Beyond Human, which includes print, online, direct mail, magazines and data buy and which reaches nearly 30 million prospective consumers monthly.
Cohen highlighted the benefits to Aytu of the acquisition. For one, it would give Aytu the chance to penetrate the "large, $40 billion consumer healthcare market," he wrote.
Second, Innovus' Beyond Human platform would lead to future growth and additional value for Aytu, noted Cohen. This in part would occur through cross-selling opportunities. For instance, Aytu could market its prescription products to consumers who show an interest in a related product like Innovus' Beyond Human Testosterone Booster or its alternative men's health products.
Per the terms of the acquisition agreement, all outstanding Innovus common stock will be retired when the deal closes, Cohen relayed. Also, subsequently, Aytu will pay Innovus about $16 million in contingent value rights (CVRs) in either cash or stock when certain predetermined milestones are met during the next five years. Should the value of the CVRs exceed the current stock price at each of those milestones, Aytu will pay the difference in cash.
Ladenburg has a Buy rating on Aytu BioScience.
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Disclosures from Ladenburg Thalmann, Aytu BioScience Inc., September 18, 2019
ANALYST CERTIFICATION: I, Jeffrey S. Cohen, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report, provided, however, that:
The research analyst primarily responsible for the preparation of this research report has or will receive compensation based upon various factors, including the volume of trading at the firm in the subject security, as well as the firm’s total revenues, a portion of which is generated by investment banking activities.
COMPANY SPECIFIC DISCLOSURES:
Ladenburg Thalmann & Co. Inc. makes a market in Aytu BioScience, Inc..
Ladenburg Thalmann & Co. Inc. has managed or co-managed a public offering for Aytu BioScience, Inc. within the past 12 months.
Ladenburg Thalmann & Co. Inc received compensation for investment banking services from Aytu BioScience, Inc. within the past 12 months.
Ladenburg Thalmann & Co. Inc had an investment banking relationship with Aytu BioScience, Inc. within the last 12 months.