Shares Rocket on Ocera Therapeutics Inc (NASDAQ:OCRX) Buyout

Ocera Therapeutics Inc (NASDAQ:OCRX)

Ocera Therapeutics Inc (NASDAQ:OCRX) shares rocketed over 65% higher today after the company announced it is being acquired by UK-based Mallinckrodt plc for $1.52 per share. The news sent investors scrambling to buy shares in the new company and share volume is on pace to register a figure over 120 times the normal daily average.

Ocera Therapeutics Inc (NASDAQ:OCRX)

Why Ocera Therapeutics is Attractive

Ocera Therapeutics Inc (NASDAQ:OCRX) is a clinical stage biopharmaceutical company that developing OCR-002 (ornithine phenylacetate) in both intravenous (IV) and oral formulations. OCR-002 is an ammonia scavenger and has been granted Orphan Drug designation (ODD) and Fast Track status by the U.S. Food and Drug Administration (FDA) for the treatment of hyperammonemia and resultant hepatic encephalopathy (HE) in patients with acute liver failure and acute-on-chronic liver disease.

Although the STOP-HE study7 did not meet its primary endpoint, it achieved secondary endpoints that validated OCR-002 as a potent ammonia scavenger. In a subsequent analysis of the data, it was observed that the degree of ammonia reduction in patients correlated strongly with clinical improvement. As the response rate also appeared to increase proportionally to dose level, this suggests that some patients in the Phase 2 trial may have been under-dosed. The IV formulation of OCR-002, if approved, is expected to provide rapid reduction in symptoms of acute HE, and potentially reduce hospitalization stay. A subset of patients continues to have HE symptoms after discharge. OCR-002’s oral formulation, if approved, is expected to provide post-discharge continuity of care for the HE patient, reducing the risk of recurrent HE episodes and rehospitalization.

The Purchaser

Mallinckrodt plc, headquartered in Staines-upon-Thames, England is a global business that develops, manufactures, markets and distributes specialty pharmaceutical products and therapies. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; and analgesics and hemostasis products. Mallinckrodt’s core strengths include the acquisition and management of highly regulated raw materials and specialized chemistry, formulation and manufacturing capabilities.

A subsidiary of Mallinckrodt plc will commence a cash tender offer to purchase all of Ocera Therapeutics Inc (NASDAQ:OCRX) outstanding shares for $1.52 per share (approximately $42 million), plus one Contingent Value Right to receive one or more payments in cash of up to $2.58 per share (up to approximately $75 million) based on the successful completion of certain development and sales milestones. Mallinckrodt plc expects dilution from the acquisition to adjusted diluted earnings per share by $0.25 to $0.35 annually beginning in 2018.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Monica has an undergraduate degree in Accounting and an MBA she earned – with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

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Monica has an undergraduate degree in Accounting and an MBA she earned - with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

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