Last year was a punk one for deals across the biotech and pharma industries. According to PWC, global deal volume dropped 23% across the Life Sciences sector, which encompasses both of these industries. Companies largely sat on their hands waiting to see what, if any, changes were coming for the tax structure in the United States.
Now that clarity has been provided from the tax reform bill signed into law a bit over a month ago, mergers-and-acquisitions activity already seems to be picking up steam.
On Monday we saw two significant deals totaling over $20 billion announced. Both contained substantial buyout premiums. Increased deal volume in 2018 across biotech and pharma is a likely theme I have been discussing on these pages for several months now.
So, what are some of the potential targets of this new wave of acquisitions? Let’s engage in some speculation.
In late August, Gilead Sciences (GILD) paid $12 billion to acquire CAR-T concern Kite Pharma (KITE) , which had a key late-stage compound (now approved). Early this week, Celgene acquired another CAR-T firm Juno Therapeutics (JUNO) for $9 billion, paying a roughly 90% premium to what the stock was trading before news of the buyout talks came to light. Juno has a late-stage compound that is on target to be approved in 2019 for a type of lymphoma. Celgene had a collaboration deal with and 10% equity stake in Juno prior to the purchase
If the trend holds, one has to think that CAR-T concern bluebird Bio (BLUE) might be next in the cross hairs. Bluebird’s main asset is a late-stage biologic targeting relapsed multiple myeloma. As it happens, Celgene also has a collaboration with this CAR-T concern and would be the most logical suitor.
Outside of oncology, I think the rare disease area is a good target for M&A in the year ahead. The new focus at the FDA to streamline the drug-approval process, especially when no or few treatments exist, bodes well for this sub-sector of the biotech industry. In addition, these purchases can be quickly accretive as they address areas where most of the afflicted individuals are already known and can be served by a small salesforce.
Amicus Therapeutics (FOLD) would be a logical pick up for a larger concern. It has one approved product, “Galafold,” in Europe that targets Fabry Disease and is seeing a rapid rollout. The compound should be greenlighted in the U.S. soon.
In addition, Amicus has a late-stage compound targeting Pompe Disease. The company could push for accelerated approval of this drug based on mid-stage trial data but more likely will go with a Phase III trial data for which would be out in 2020. There is an existing drug for this rare disease that is climbing toward $1 billion in annual sales. Amicus’s compound is looking like it is seeing much improved outcomes in studies so far.
With a market cap of under $2.7 billion, Amicus could see some interest from suitors in 2018.