Small caps last week: Curaleaf's hostile bid, Amylyx GLP-1 results, defense tech IPO

Medical cannabis producer Curaleaf is looking to acquire Canadian peer Aurora in a hostile bid to create an industry leader, while biotech Amylyx Pharmaceuticals has successfully tested a new GLP-1 drug and is preparing to seek approval. Meanwhile, Lyntris, which develops sensors used in missile and air defense, raised $100 million in an IPO. These stories headline our recap of happenings in the small-cap space for the week of August 17-21.

Curaleaf Holdings, a medical cannabis producer whose 2018 IPO made its largest shareholder, Boris Jordan, a billionaire, is seeking to acquire Canadian rival Aurora Cannabis. Curaleaf believes the combined company could become the industry leader.

Curaleaf said it would launch a tender offer to acquire Aurora Cannabis shares directly from shareholders. It will offer $4 per share, consisting of 0.3 Curaleaf shares plus $0.75 in cash. The transaction values the entire company at $290 million. The offer will remain open until December, and Curaleaf may extend or withdraw it.

Curaleaf took its acquisition proposal directly to shareholders after unsuccessful attempts to discuss it with Aurora’s board. Curaleaf notes that Aurora’s results are under pressure from lower medical cannabis reimbursement rates in Canada and the cancellation of reimbursement in Germany. In addition, Aurora shareholders have faced “millions of dollars in restructuring costs and billions of dollars in write-offs, as well as continued dilution from an at-the-market equity issuance program at prices below our offer price,” Curaleaf noted. In February, Aurora announced that it had filed a prospectus supplement allowing it to sell new shares from time to time for aggregate proceeds of up to $100 million.

Curaleaf believes the combined company would become the cannabis market’s largest player, with revenue of $1.5 billion. Curaleaf’s own revenue declined 5% last year to $1.27 billion. In a letter to shareholders published on August 11, Aurora said it had received two proposals from Curaleaf but considered the proposed price too low.

All six Wall Street analysts covering Curaleaf rate the stock “buy.” The average target price is $13.90 per share, implying 51% upside from the Friday close.

Mid-cap biotech Amylyx Pharmaceuticals reported that its experimental drug, which, like Novo Nordisk’s Ozempic, targets the GLP-1 receptor, met all clinical trial endpoints. Amylyx shares jumped 64% on Tuesday to their highest level since February 2023.

Avexitide is intended for patients with post-bariatric hypoglycemia, a rapid drop in blood glucose following bariatric surgery. The condition can have serious consequences, including loss of consciousness, seizures, and disability, but there is currently no approved treatment.

Chief Medical Officer Camille L. Bedrosian said that following the successful trial, the biotech is “moving with urgency to submit an NDA to the FDA.” If approved, the drug could reach the market as early as 2027.

Amylyx shares have surged more than 220% year to date. The biotech has 11 “buy” ratings versus one “hold,” according to MarketWatch data. The average target price is $42.18 per share, implying 9.3% upside from the last close.

Defense tech Lyntris raised $100 million in an IPO on the New York Stock Exchange. The firm, which develops sensors used in missile and air defense, sold 5.7 million shares at $17.50 apiece, below the lower end of its expected price range of $19-22 per share. Existing Lyntris shareholders, including private equity firm Trive Capital, sold another 11.28 million shares for $197.5 million. In total, the company and its shareholders raised $297.5 million, although they had sought to raise as much as $528 million.

Lyntris technology is used in more than 200 defense programs run by the U.S. Defense Department and several of its allies, according to defense industry portal Access Hub. The company’s order book rose 112% year over year in the first half to $923.9 million, it said in its IPO filing. Revenue over the same period increased around 35% year over year to $241 million.

However, the company remains unprofitable, and its net loss widened 34% in January-June to $13 million, largely due to debt service costs, notes trading platform Minichart. Using the IPO proceeds to repay the debt should improve the situation.

Freedom Broker analyst Alem Bektemirov has set a target price of $19.79 per share for Lyntris, implying 13% upside from the IPO price.