Deal of the Day: Cepheid (CPHD) Sells Out to Danaher (DHR) for $4B

M&A Deal of the Day: Cepheid (CPHD) up 50% Over Friday Close on Cash Buyout

We have been spending too much time on biopharma. It is time to dust off our Dx and Tools portfolio, which is on hold, and find some value stocks for Q4 moves. We did an update in Q4 of 2015 on Molecular Diagnostics before stocks took a big hit in early 2016. The issue has been disappointing growth despite a strong Molecular Dx market. M&A consolidation should pick up.

Prior to the sale CPHD sold at a P/S of 4.43 (now post deal at 5.5X) and a PE of 32.78, not really that expensive for a stock that has been on everybody’s “buy-out” list for years. Sales QtoQ is growing at 10.2% also not too shabby. Cepheid is a leader in molecular diagnostics and this deal appears to have good synergy and Danaher needs to boost revenue growth and EPS which has been lagging. Danaher spun off its industrial division in July to better focus on life sciences and technology.Both Danaher (DHR) and Hologic (HOLX) have been very successful growing through M&A. Danaher (DHR) stock is down 2.2%

Many stocks in the sector were movers today benefiting from the Cepheid deal but no obvious trades at the moment:

As of 10:30a PDT

AXDX up 5.4%,EXAS up 2.87%, GHDX up 2.58%, ILMN up 1%, NVTA up 7.5%, PACB up 1.81%, QGEN up 1.24%.

We will update our sector review later this week.

Disclosure: long Foundation Medicine (FMI), Pacific Biosciences (PACB)

 

 

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