Shares of Opiant Pharmaceuticals (OPNT) are on the rise after Emergent BioSolutions’ (EBS) announced the acquisition of Adpat Pharma. Commenting on the deal, Cantor Fitzgerald analyst Brandon Folkes told investors he believes the acquisition underscores the potential for companies addressing the opioid overdose market, and that Opiant presents an attractive risk/reward, even if it captures only a portion of the growing market.

EMERGENT ACQUIRES ADAPT PHARMA, NARCAN NASAL SPRAY: Emergent BioSolutions has announced that it has entered into an agreement to acquire Adapt Pharma and its flagship product Narcan Nasal Spray, the first and only needle-free formulation of naloxone approved by the Food and Drug Administration and Health Canada for the emergency treatment of known or suspected opioid overdose as manifested by respiratory and/or central nervous system depression. Total consideration for the transaction is up to $735M consisting of an upfront payment of $635M and up to $100M in cash for potential sales-based milestones through 2022. Upon the closing of the transaction, Emergent will acquire the Narcan Nasal Spray product and a development pipeline of new treatment and delivery options to address opioid overdose and bring on approximately 50 employees, located in the U.S., Canada, and Ireland. Adapt Pharma is also developing new treatment and delivery options to address opioid overdoses. From a financial perspective, the company expects the incremental revenue contribution in 2019 from the acquisition to be between $200M-$220M. The company also anticipates that the transaction will be accretive to adjusted net income and EBITDA in 2019.

VALUE IN OPIANT AFTER ADAPT DEAL: In a research note to investors, Cantor Fitzgerald’s Folkes argued that Emergent BioSolutions’ acquisition of Adapt Pharma underscores the value of the opioid overdose market. At a market cap of about $44M, the analyst pointed out he believes Opiant presents an attractive risk/reward, even if it captures only a portion of the growing market. Opiant is expected to generate about $30M-38M in cash from Narcan royalties and the milestone payment in 2019, to fund the development of its own opioid overdose nasal spray, OPNT003, and the other programs in the company’s pipeline, he noted. Overall, Folkes said he expects investors to begin to appreciate the market potential of Opiant’s pipeline, which should drive the stock higher. The analyst reiterated an Overweight rating and $32 price target on Opiant’s shares.