Oyster Point Pharma jumps 37% as Viatris agrees to acquire for $11/share in cash

Maksim Labkouski

Updated to add latest share price moves

• Oyster Point Pharma (NASDAQ:OYST), a company focused on eye disorders, announced Monday that Viatris (NASDAQ:VTRS) agreed to acquire it for $11.00 per share in cash plus a contingent value right (CVR).
• After a brief clinical hold, Oyster (OYST) shares jumped ~37% in reaction to the news.
• The company said that its shareholders owning about 46% of the common stock, have agreed to tender their shares in support of the deal, which is expected to close in Q1 2023.
• The CVR entitles Oyster (OYST) stockholders to receive a potential per share cash payment of up to $2.00, subject to the achievement of certain commercial milestones related to the company’s FDA-approved dry eye disease therapy, Tyrvaya.
• Viatris (VTRS) Chief Executive Michael Goettler identified the deal as an initial step to become “the next global ophthalmology leader.”
• Viatris (VTRS) has added ~3% after the company announced its Q3 2022 financials.

Comments

[FCFGUY]

Finally, signs of life. The sale of the biosimilar franchise came as a surprise – it was supposed to be the future. Obviously, management saw a flaw in that assumption.

Now management wants to be “the next global ophthalmology leader”. Why not? Management has access to a global distribution network. They see what sells and for how much, and, what doesn’t. Selling little vials of ‘not too expensive to make stuff’ for a huge markup seems like a pretty good idea, and if they can establish a global franchise in the sector, so much the better. Viatris is a huge global marketer of medical OTC product – what’s the use of having a powerful distribution platform if you don’t use it?

[WillingToLearn]

@Friso Alenus isn't this bad for OYST shareholders, stock IPOed close to $17, in 2020 has high as $38.
52 week range
3.46 - 19.98

[Friso Alenus]

@WillingToLearn probably is. But I’m a Viatris shareholder. :)

[User 40509285]

@WillingToLearn You should have sold at $38. Just because it went that high, doesn't mean that it's worth that. For a small specialty pharma like OYST I'm sure it was over-priced for the IPO.

[ronald61239]

What will be the total cost to Viatris be ?? Will the funds come from FCF or a loan ??

[Friso Alenus]

@ronald61239 will be funded by the biosimilars sale. Both acquisitions would cost Viatris around 700-800 mil. This still leaves some room for buybacks. Stock reacts positive because investors see new path to sales growth + good earnings results.

[ronald61239]

@Friso Alenus ---And I thought those fund would be used to pay down debt.

[Friso Alenus]

@ronald61239 plan was buybacks and they were open for M&A. Debt target was achieved before schedule in 2022. Securing strong long term FCF also important.

[PharmaInterest]

What a disappointing takeout price for OYST. Viatris won't close the acquisition of Oyster Point until Q1 2023, perhaps there still is hope for a bigger more capable eye care player that could better commercially leverage what is probably the best dry eye data and label in the ophthalmic space.

[w97]

Another value losing Aquisition. This company's MO ever since it was Mylan was to destroy shareholder value through overpaying for other companies.

[Friso Alenus]

@w97 weak argument, all buyouts in biotech are money losing companies since they have no proper supply chain and marketing. Viatris does have the infrastructure to make money with these acquisitions.

[Former Wall Streeter]

Has Viatris ever before indicated a goal to be “the next global ophthalmology leader"?

[manoncyber]

@adambcohen
It`s always the first time sometime.

[Capital Kong]

why do share buybacks or debt pay down at low PE's when you can acquire negative earning GAAP companies....at least this management team no longer has any of my money.

[Friso Alenus]

@Capital Kong weak argument, all buyouts in biotech are money losing companies since they have no proper supply chain and marketing. Viatris does have the infrastructure to make money with these acquisitions.

[dima_b]

@Capital Kong wouldn't the right question be why OYST's earnings are negative and if the reason is something that VTRS is in a good position to remedy to its advantage?

[Wapiti19]

More debt….Sigh

[Friso Alenus]

@Wapiti19 no debt. Biosimilars sale will fund two acquisitions and share buybacks.

[TraderJoeZ]

Interesting