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Investment Banks Upgrade Quidel Shares on Acquisition of Alere Assets

NEW YORK (GenomeWeb) – Canaccord and William Blair have upgraded their ratings on Quidel’s shares to Buy and Outperform, respectively, based on its acquisition of Alere's Triage B-type natriuretic peptide assay and cardiovascular and toxicology diagnostic assets, announced yesterday.

Quidel agreed to pay $400 million for the assets and $40 million in contingent consideration. It expects the deal to close by Sept. 20.

In a research note, Canaccord's Mark Massaro said that an approximate 25 percent move in Quidel's stock yesterday suggests that it got a "good deal" on the assets, and investors that shorted Quidel sought to exit their short position as quickly as possible. He further noted that Quidel will double its revenues with assets completely unrelated to the flu and provides the company with new platforms on which to add new tests.

Quidel expects Triage to return to mid-single digit  growth and roughly flat B-type natriuretic reagent revenue. Along with the upgrade, Canaccord raised its price target on Quidel's stock to $42 from $25.

Meanwhile, William Blair's Brian Weinstein said in a research note that the bank has been vocal in its frustration with the company's reliance on influenza-based revenue and the game it calls "flu roulette," given the unpredictability of the duration and severity of the flu season. The deal brings Quidel into new, attractive areas of diagnostic testing, while diversifying the company's business both geographically and in terms of being less dependent on influenza revenue.

"Quidel is only paying $400 million, plus $40 million in contingent consideration …  for a set of assets that generated 2016 revenue of $197 million … and EBITDA of around $45 million," Weinstein noted. "For perspective on the size of this deal related to Quidel, the stand-alone Quidel business had revenue of $192 million in 2016 with adjusted EBITDA of about $50 million."

Alere is divesting these products in order to obtain antitrust approvals required for its pending acquisition by Abbott. As such, Quidel's acquisition is subject to the completion of Abbott's acquisition of Alere, as well as antitrust approvals and other customary closing conditions.

Shares of Quidel were up more than 9 percent at $37.4 in Tuesday afternoon trading on Nasdaq.