Zoetis (ZTS) Inks Agreement To Acquire Nexvet Biopharma

Zoetis Inc. (NYSE:ZTS) announced an agreement to buy Nexvet Biopharma plc (NASDAQ:NVET) for an aggregate equity valuation of approximately $85 million. Nexvet is a biologic therapeutics company developing monoclonal antibody (mAb) therapies for companion animals.

Per the agreement, Zoetis will pay $6.72 for each share of Nexvet, a premium of 66% to the latter’s closing price as of Apr 12. Zoetis expects the acquisition to strengthen its pipeline for chronic pain management in dogs and cats.

Nexvet’s pipeline candidates include ranevetmab and frunevetmab for the treatment of chronic pain associated with osteoarthritis in dogs and cats, respectively.

Zoetis shares gained 9.4% in the past one year, outperforming the Zacks classified Medical – Drugs industry, which remained flat in the same period.

The acquisition has already received unanimous approval from Nexvet’s board of directors and awaits approval of its shareholders and the Irish high court. The deal is expected to be completed in the second half of 2017.

Treatment of chronic pain in companion animals is estimated to be a $400 million industry. Zoetis already serves the industry through its drug, Rimadyl for the treatment of osteoarthritis pain and inflammation in dogs. Another of its non-steroidal anti-inflammatory drug, Trocoxil is approved in EU for the same indication as Rimadyl. Zoetis is a pioneer in antibody therapy solutions. The company also has presence in vaccines, parasiticides, medicated feed additives and other pharmaceuticals.

Zoetis has been working on strengthening its product portfolio through acquisitions and deals. It acquired a veterinary diagnostic focused company, Scandinavian Micro Biodevices, for $80 million in Aug 2016. The acquisition added a suite of specialty test instruments and cartridges to its diagnostics portfolio and pipeline in the fast-growing segment of animal health.

The acquisition of Nexvet may help the company to protect its leading position in osteoarthritis pain in animals in the face of stiff competition from bigger companies like Merck & Co., Inc.’s (NYSE:MRK) Merck Animal Health, Eli Lilly and Company’s (NYSE:LLY) Elanco, Bayer (DE:BAYGN) Animal Health (the animal health division of Bayer) and Boehringer Ingelheim Animal Health (the animal health division of Boehringer Ingelheim).

Zoetis currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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