Draxis Health Shares Up on News of Potential Sale

Responding to a frenzy of trading activity Monday morning that drove shares 7% higher, Draxis Health Inc. (DRAX) said that it is in exclusive talks that could lead to the outright sale of the company.

Draxis management added that it is uncertain at this stage whether discussions will continue or result in any agreement or transaction or result in pricing that will be acceptable either to the company's board or to shareholders.

Desjardins analyst Maher Yaghi told clients in a note that the annoucement is positive for Draxis shareholders, adding the most attractive asset for potential suitors is the company's Draximage radiopharmaceutical division.

He wrote:

Potential private equity firms or U.S. corporations could be interested in the highly lucrative aspect of this business, as well as the notion that there are only a handful of companies--Draxis being one of them--that would be able to introduce a generic form of the commonly-used Cardiolite (sestamibi) product on the market.

The analyst added:

Would-be buyers for the company would also see the inherent value in DRAXIS' manufacturing business, which is expected to get a boost from the roll-out of production from the current non-sterile manufacturing contract with Johnson & Johnson (JNJ).

Mr. Yaghi said a takeout price of $6.50 per share, which includes $4.50 for the base business, $1.00 - $1.50 for the sestamibi opportunity, and $0.70 for the JNJ non-sterile contract, would offer a fair value to current investors.