Lundbeck announced Monday it would buy Longboard Pharmaceuticals in a $2.6 billion deal that sent Longboard stock to a record high.
Longboard is working on treatments for forms for epilepsy, including Dravet and Lennox-Gastaut syndromes. Its leading drug, bexicaserin, has shown promising anti-seizure effects in preclinical and clinical studies.
Wedbush analyst Laura Chico says the deal makes sense for both sides. The Food and Drug Administration granted Longboard Pharmaceuticals a breakthrough designation. Meanwhile, the company was ramping up its efforts to explore further seizure treatments.
"While we anticipated the company would be capable of executing on a such a program, Lundbeck holds a strong presence and reputation in the (central nervous system) therapeutics space and has interests in epilepsy," she said in a report.
On the stock market today, Longboard stock skyrocketed more than 51.7% to 58.99. Shares hit a record high and solidified a breakout at 40.48 above a consolidation, MarketSurge chart analysis shows.
Longboard Pharmaceuticals: Price Is 'Fair But Full'
The deal values Longboard stock at 60 a share, representing $2.6 billion in equity value and $2.5 billion net of cash.
Lundbeck estimates bexicaserin could bring in a peak of $1.5 billion to $2 billion in sales.
"We see the $2.5 billion price as fair but full," Wedbush's Chico said. She downgraded Longboard stock to a neutral rating and boosted her price target to 60 from 44. Both boards have already signed off on the deal, which is expected to close in the fourth quarter.
Shares of Longboard Pharmaceuticals have a perfect IBD Digital Relative Strength Rating of 99. This means they outrank 99% of all stocks when it comes to 12-month performance.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
