by James Brumley | February 25, 2014 9:48 am
Though the recent wave of merger-mania among biotech stocks still looks like it’s in its final chapters, it’s not like we’re never going to see another buyout from the industry again. They’re just going to be fewer and farther between until valuations come down a bit.
So, which biotech stocks remain the market’s most likely acquisition candidates? Here are five takeover targets speculators may still find worth a shot … not just because they’re possible M&A plays, but because they have compelling pipelines even if they never get bought up by bigger biotech companies.
Here are the top five biotech stocks that are also buyout candidates.
Though the disease has been studied since 1868, it has only been in the past few years that medical science has understood multiple sclerosis well enough to develop meaningful treatments for it. Indeed, it’s only been very recently that big pharma has felt the field is promising enough to bother with, and very few biotech stocks have significantly benefited from these R&D advances.
Enter Acorda Therapeutics (ACOR). Acorda Therapeutics has three drugs on the market, but the big Kahuna is Ampyra, for multiple sclerosis patients who have difficulty walking. Last year, the company sold $302.6 million worth of Ampyra. It’s not a lot, but it’s a lot for a company that doesn’t have much marketing clout. In the hands of a company with more sales firepower wanting to get into the $11 billion MS market, however, Ampyra makes ACOR one of the few biotech stocks in the arena worth a suitor’s consideration.
Although Incyte (INCY) already has an oncology product on the market (Jakafi), it’s what’s in the pipeline that could quietly be making INCY one of the better acquisition targets among biotech stocks right now.
Jakafi (ruxolitinib) is in clinical trials as a treatment for pancreatic cancer as well as other malignancies, while INCB-39110 and baricitinib are both in latter-stage trials as therapies for myelofibrosis and rheumatoid arthritis, respectively. If all goes well in the fourteen different clinical trials Incyte is conducting at this time, the potential revenue of its pipeline totals in the billions, annually.
The nice part for newcomers is that the company has remained on the fringe of the media’s spotlight, so there’s still plenty of value for INCY stock yet to materialize. It’s an easy addition to anyone’s list of biotech stocks that are also buyout targets.
With a market cap of only $1.1 billion, Idenix Pharmaceuticals (IDIX) is more than affordable enough for most any major biopharma company. But it’s not its affordability that makes IDIX stock an interesting acquisition candidate. Idenix is smack dab in the middle of the biotech industry’s newest hot button — hepatitis (B as well as C).
Though its hepatitis C drug, IDX-184, suffered a setback last year in the form of a delay of human trials, and IDIX stock tanked when Johnson & Johnson (JNJ) opted to acquire a Hep-C drug from rival drugmaker GlaxoSmithKline (GSK), Idenix Pharmaceuticals’ pipeline is still one of the more promising ones out there among established biotech stocks.
What’s even more encouraging to current and prospective owners of IDIX stock is that the company is already collaborating with the aforementioned GlaxoSmithKline as well as Novartis (NVS). Given the current involvement, it would take little motivation to prod either of those current partners into outright ownership of Idenix, just to simplify their current collaborations and collect all the future revenue of those partnerships.
And, we already learned a few days ago that Novartis is in a buying mood. Other biotech stocks may well be in its sights, as it looks to expand its portfolio.
Ever heard the term “where there’s smoke, there’s fire”? While the idea of an acquisition of Ariad Pharmaceuticals (ARIA) has been scoffed at and dismissed of late, it’s been so adamantly and repeatedly dismissed, one can’t help but wonder if investors and the media are trying desperately trying to talk themselves out of believing something they don’t want to think is likely … a true contrarian clue.
If you’re not familiar with the company, this might ring a bell — ARIA stock tanked in October when Ariad Pharmaceuticals’ one and only drug, Iclusig, was implicated as the probable cause of blood clotting in the leukemia patients who were taking it.
Though in retrospect it’s clear the market as well as the FDA over-reacted (the drug is back on shelves in the United States, just with a longer list of warnings), the stock has yet to reclaim its pre-plunge highs. ARIA stock is the ultimate contrarian play among the biotech stocks that are also buyout candidates.
Despite disappointing results from Dendreon’s (DNDN) much-ballyhooed prostate cancer drug, Provenge, there’s still a big opportunity in the market. The prostate cancer market just needs the right drug. Medivation (MDVN) may well have that drug, with XTANDI. XTANDI is already approved by the FDA for men with castration-related prostate cancer.
In fact, Medivation is expected by some to sell $866 million worth of the drug in 2014. And others think it could be worth $3 billion per year in a market where there are too few treatment options, as its permitted usage widens and the company’s other drugs hit the market.
If that sales projection is anywhere close to being on target, MDVN stock is an outright bargain, as the company’s current market cap is only $6.4 billion. That makes it one of the more undervalued biotech stocks out there, which in turn makes it a potential target for a pharma company that can see the bigger picture and wants to get into a market that could be worth more than $9 billion by 2021.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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