ALC - Alcon doubles down on glaucoma with Aerie acquisition - BTIG

BTIG says that the decision by Swiss eye care company Alcon ( NYSE: ALC ) to acquire U.S.-based Aerie Pharmaceuticals, Inc. ( AERI ) “makes a lot of sense” as the former seeks to expand in glaucoma, a common eye condition that can lead to vision loss.

ALC is trading flat, and AERI jumped ~36% in the pre-market trading after the companies announced the $770M deal late Monday.

With the transaction, ALC adds AERI’s commercialized ophthalmic solutions Rocklatan and Rhopressa indicated for patients with open-angle glaucoma or ocular hypertension.

According to BTIG’s Ryan Zimmerman, both products serve the glaucoma market, where ALC intends to expand its footprint with ophthalmic drop sales.

“With ALC already selling into the glaucoma space via Hydrus (its surgical glaucoma implant), moving upstream to earlier therapeutic interventions seems like a natural extension,” Zimmerman wrote, noting the preference of doctors to seek ophthalmic drops for glaucoma before surgery.

In addition, the analyst points out that AERI’s revenue growth and gross margins will be immediately accretive at 20% and mid-to-high 80s, respectively, and EPS will be accretive in 2023 after the integration. Zimmerman added that these benefits will help address some of the concerns over ALC’s overall margin trends heading into 2023.

The analyst, who has a Buy rating and an $80 per share target on ALC, concluded that ALC is acquiring AERI at a compelling price tag of ~5x of next twelve-month sales.

According to AERI’s valuation metrics, the stock was trading at ~4.0x in terms of the forward sales.

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