BofA initiates Supernus Pharmaceuticals stock at buy on merger scale

BofA Securities has initiated coverage on Supernus Pharmaceuticals Inc. (NASDAQ: SUPN) with an optimistic buy rating and a price target of $47.00, indicating an 80% upside potential from its current stock price of $26.16. The analyst believes the company is undervalued based on its Fair Value analysis. The merger with Indivior and the legacy Supernus Pharmaceuticals has resulted in a combined entity operating under the Supernus name, benefiting from increased scale and a diversified portfolio of treatments for neurological disorders such as Parkinson's disease and ADHD.

Analysts estimate that the legacy Supernus's revenue will drive approximately two-thirds of the portfolio's growth until the early 2030s, with the company already showing strong momentum, witnessing a 16% revenue increase over the past year. Supernus Pharmaceuticals' diverse revenue stream, thanks to Indivior's addiction drugs, will help mitigate the risk of losing exclusivity for Supernus' products.

The price target of $47.00 is calculated based on 8 times the estimated EBITDA for 2028. Supernus has also made adjustments to its Convertible Senior Notes, increasing the conversion rate from 24.0033 to 30.9355 shares per $1,000 principal amount. Indivior's termination of its Copacker Supply Agreement with Reckitt Benckiser Healthcare on January 15, 2027, will cease the production of SUBOXONE and SUBUTEX tablets.

The biotech funding sector has experienced a substantial 75% year-over-year increase, spurred by a rise in initial public offerings and follow-on offerings.