- Alnylam (ALNY): pioneering a new class of therapeutics based on RNA interference and a better fit for collaboration partner Novartis (NYSE:NVS)
- BioMarin (NASDAQ:BMRN): a rare disease gene therapy company with an attractive valuation
- Crispr (NASDAQ:CRSP): powerful platform technology for expeditiously developing effective genomic medicines
- Ionis (NASDAQ:IONS): novel technology, vibrant pipeline, commercial products and multiple alliances
- Mirati (NASDAQ:MRTX): potential regulatory approval for cancer drug targeting KRAS mutations
- Sarepta (NASDAQ:SRPT): leader in Duchenne muscular dystrophy drug development, with four approved drug and several others in the pipeline
- Intercept Pharma (NASDAQ:ICPT): has a late-stage NASH treatment candidate in the pipeline
The biopharma sector could be in for reversal after a not-so-enterprising performance in 2021. One of the catalysts that could work in its favor is deal optimism. M&A deal flow dwindled in 2021, reflecting stricter antitrust laws. The number of done deals dropped to 92 from 101 in 2020 and 111 in 2019. The average deal size also shrank from the historical mean of $4.3 billion to $2.8 billion.
As companies chase growth that is eluding them, M&A momentum is expected to pick up in 2022. According to Glenn Hunzinger, U.S. Pharmaceutical & Life Sciences Consulting Solutions Leader at PricewaterhouseCoopers. Hunzinger said:
“Biotech and smaller medical device deals should continue in the first half of the year, with the second half poised for larger deals driven by a need for scale and an expected settling of the regulatory landscape.”
Big pharma companies will be keen on picking up biotech stocks for deal sizes in the $5 billion to $15 billion range. The quest behind the drive is to fill potential gaps in the pipeline. PwC also expects large-sized deals, valued at $50 billion or more, for diversifying into adjacent therapeutic areas.
Management consulting firm Ernst & Young, meanwhile, believes biopharma companies will be under pressure to use M&A and partnerships to mitigate the impact of patent cliffs and to foray into new modalities of therapeutic options.
The following seven biotech stocks could end up as M&A targets in 2022:
Biotech Stocks: Alnylam (ALNY)
Alnylam (NASDAQ:ALNY) may have faced a setback recently following an extension to the review period for its Vutisiran, a next-gen RNAi therapeutic candidate, but it still has one of the most exciting pipelines. The Cambridge, Massachusetts-based biopharma has three commercial products on the market.
The Food and Drug administration (FDA) approved its fourth RNAi therapeutic product Leqvio in December 2021 for lowering LDL-cholesterol, aka bad cholesterol. This therapeutic has been licensed to Swiss pharma giant Novartis.
Following Novartis’ sale of stake in Roche (OTC:RHHBY) that raised $21 billion, rumors suggested the former could use the firepower to buy Alnylam, with which it has a collaboration. The speculation gained further ground when Denmark-based Novo Nordisk (NYSE:NVO) announced a deal to buy Dicerna, also a RNAi therapeutic company.
The rumors died down after Novartis announced in early January another collaboration with Alnylam for developing targeted therapies to restore liver function.
Alnylam stock has a market capitalization of over $20 billion. Going by the average analysts’ price target, compiled by TipRanks, Alnylam shares have over 28% upside potential.
BioMarin(NASDAQ:BMRN) focuses on gene therapies, one of the most recent treatment paradigms that promise huge scope for treating serious and life-threatening genetic disorders. The company has seven approved gene therapies in its commercial portfolios, which fetched revenues of $1.86 billion in 2021. It expects to grow its revenues by 14% in the next fiscal year.
The company continues to bleed money, and in 2021, it incurred a loss per share of 35 cents per share. Cash position at the end of the fiscal year was at $1.52 billion.
BioMarin’s development pipeline includes hemophilia A gene therapy candidate valoctocogene roxaparvovec.
An early-stage asset, codenamed BMN 307, is mired in trouble. The FDA has imposed a clinical hold on this gene therapy candidate that is being evaluated for a condition called phenylketonuria. The most recent update provided by the company suggests it may take several quarters for the issue to be resolved.
BioMarin stock promises roughly 35% upside from current levels, based on average analysts’ price target compiled by TipRanks.
Biotech Stocks: CRISPR (CRSP)
Gene-editing company Crispr (NASDAQ:CRSP) has long been considered as a potential M&A target owing to its promising technology platform and its longstanding partnership with Vertex Pharma (NASDAQ:VRTX).
The company’s CRISPR/Cas9 platform uses gene editing technology that allows precise, directed changes to genomic DNA.
Cambridge, Massachusetts-based Crispr’s lead asset CTX001 is in development for two indications — beta thalassemia and sickle cell disease — in collaboration with Vertex Pharma. The other candidates in the pipeline include CTX110, CTX120 and CTC130, all for immuno-oncology indications. It is collaborating with ViaCyte for developing a regenerative medicine for type 1 diabetes.
Analysts, on average, predict over 75% upside for Crispr shares.
Ionis (NASDAQ:IONS) is commercial-stage biopharma developing RNA-targeted therapy using antisense technology that can control gene expression in a cell using antisense oligonucleotides (ASO). These ASOs regulate the expression of a specific factor, which if present causes a particular disease.
The company has three marketed products and boasts of a vibrant pipeline, with a host of investigational therapeutics. Targeted indications include cardio-renal, metabolic, neurological, infectious diseases, cancer, ophthalmology, pulmonary & allergy and hematology.
Ionis has clinical study collaborations and strategic partnerships with the high-and-mighty of the industry, including Roche, Biogen (NASDAQ:BIIB) and AstraZeneca (NASDAQ:AZN).
Biotech Stocks: Mirati (MRTX)
Oncology-focused biopharma Mirati (NASDAQ:MRTX) is developing a class of drugs called KRAS inhibitors. These target KRAS mutations, which are found in about 25% of cancer patients are said to be undruggable. Mirati’s KRASG12C inhibitor adagrasib is evaluated as a monotherapy and in combination for several cancer indications.
Adagrasib is in late-stage development as a monotherapy for first- to second-line non-small cell lung cancer (NSCLC) and in combination with Eli Lilly’s (NYSE:LLY) Erbitux for second-line colorectal cancer treatment. The FDA has accepted the new drug application for adagrasib in NSCLC, with a PDUFA goal date of Dec. 14, 2022. Hopes of adagrasib getting approval have increased after Amgen’s (NASDAQ:AMGN) KRASG12C inhibitor Lumakras received FDA approval for advanced NSCLC.
Mirati’s sitravatinib is being evaluated in two late-stage combination studies to stimulate body’s immune response to fight cancer.
Analysts, on average, see scope for about 90% upside for Mirati stock.
Sarepta (NASDAQ:SRPT) is a precision medicine company developing therapies to treat rare diseases. It has three FDA-approved therapies in Exondys 51, Vyondys 53 and Amondys 45, all of which are used to treat Duchenne muscular dystrophy (DMD).
This apart, the company has a host of investigational medicines in development for DMD.
Additionally, it has a robust gene therapy pipeline, targeting DMD, limb-girdle muscular dystrophies and several other indications. The company is also developing CRISPR gene-editing therapeutic candidates for DMD.
Biotech Stocks: Intercept Pharma (ICPT)
Intercept Pharma(NASDAQ:ICPT), a company focused on non-viral liver diseases, is a risky M&A target because it is a one-trick pony. The company’s drug Ocaliva has been approved for primary biliary cholangitis.
It is running mid-stage clinical trials of the drug, in combination with bezafibrate, in PBC, late-stage studies in non-alcoholic steatohepatitis (NASH) and a mid-stage study in biliary atresia.
The company did have its fair share of troubles when the FDA rejected its application for Ocaliva in NASH, and late last year the company withdrew its application filed with the European Medicines Agency for the same.
Given that the FDA is yet to approve a NASH drug, it is worth taking a risk with this “one-trick” pony.
Screening Criteria Used:
- Attractive & promising pipeline/technology
- Weak profitability/loss-making
- Low Leverage
- Depressed valuation
On the date of publication, Shanthi Rexaline did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.