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Why Neos Therapeutics Inc Rose 13.7% In October

What happened

Shares of Neos Therapeutics (NASDAQ: NEOS), a small-cap pharmaceutical company focused on attention deficit hyperactivity disorder (ADHD), jumped 13.7% in October according to data from S&P Global Market Intelligence. It was a month filled with news, but October's rally can be pinpointed to a single event.

So what

Here's a quick review of the company-specific news items that took place in October:

  • On Oct. 2, the company officially launched Cotempla XR-ODT for sale. Cotempla is an extended-release orally disintegrating tablet that treats ADHD in pediatric patients.
  • On Oct. 18, the company announced that it has reached a settlement agreement with Allergan (NYSE: AGN) related to its ADHD drug Adzenys XR-ODT. The agreement grants Allergan the right to manufacture and market a generic version of Adzenys XR-ODT starting on Sept. 1, 2025. 

While those updates were interesting, the company's stock didn't take off until shareholders learned that PDL BioPharma (NASDAQ: PDLI) had made an unsolicited bid to acquire the company outright. PDL -- which is a biopharma with a checkered history -- offered to buy all of the company's outstanding shares for $10.25 in cash. Since shares were trading around $7.30 prior to the announcement, they jumped hugely after the news broke.

However, on Oct. 30, the company's Board recommended that shareholders should reject the bid.

Nonetheless, the takeover offer netted shareholders a double-digit gain in October.

Image source: Getty Images.

Now what

Neos' shareholders shouldn't have been surprised by the Board's recommendation to reject the buyout offer. PDL BioPharma had made three other attempts earlier this year to buy out Neos for that same $10.25 per share. In all three cases, the Board recommended a rejection. It appears that PDL BioPharma's management team isn't getting the hint.

Neos' share price has remained volatile since the end of October and is currently trading well over the $10.25 per share offer price. That hints that traders think a more aggressive takeover offer might be on its way.

Whether or not another offer materializes is anyone's guess. For that reason, shareholders should continue to focus their attention on the company's long-term potential and do their best to ignore the day-to-day price action.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.