Are Biotech expecting a takeover?
2017 could be the year of acquisitions in the biotech industry
Elena Stepunina, RIA AMI
Companies operating in the biotechnology sector began to feel very insecure. And to such an extent that many analysts predict that in 2017 this industry will be overwhelmed by a wave of acquisitions. And there is no secret. Biotechnology depends a lot on political sentiments and related changes. This is especially noticeable in the area of drug pricing.
Vesti Ekonomika cites recently concluded deals as an example:
Takeda Pharmaceutical has bought the manufacturer of medicines for the treatment of cancer Ariad Pharmaceuticals.
Derma Sciences: The company's shares rose by 40% after the company gave permission for the takeover by Integra LifeSciences.
Shares of CoLucid Pharmaceuticals also rose 32% on the news that it will be bought by Eli Lilly.
Valeant Pharmaceuticals has decided to sell Dendreon Pharmaceuticals to the Chinese company Sanpower Group.
Analysts' forecast: this is just the beginning! Wait for interesting news in biotechnology in the coming year, they say.
According to experts, there are five reasons that allow us to come to such conclusions.
1. Biotech companies themselves declare that they are on the verge of takeover
In a recent Ernst & Young survey, 43% of biotech CEOs said they had five or more deals in the works, up from just 6% in April 2016. John Milligan, the head of Gilead, said in an interview that the need to promote its products this year requires making acquisitions a priority.
2. Running out of ideas
The reason for the queue of "krupniaks" to absorb their smaller brethren lies on the surface. In 2016, the FDA approved only 22 new medicines – half of those adopted a year earlier. And thus, a number of companies become dependent on fewer new medicines.
This can be seen in the example of Celgene. Last year, it announced a profit of $11.2 billion. And almost $7 billion was received due to the drug for the treatment of oncology Revlimid.
3. Techniques for increasing profits exhaust themselves
The favorite ways of large companies to increase profits, in particular, raising prices, placing headquarters in countries that belong to the category of "tax haven" and many others. The problem is that these methods in reality do not create long-term profits for shareholders, and these methods are unsuitable for permanent use. It turns out that these tricks eventually exhaust themselves.
4. Potential for such transactions
Now, more than ever before, biotech companies have the potential necessary to conclude such transactions. Ernst & Young estimates this potential at approximately $600 billion. But if American companies are given permission to repatriate their income at a favorable interest rate, this amount could increase by at least $100 billion. And politicians in Washington are currently considering this plan.
Among the companies with the highest potential for acquisitions are: Johnson & Johnson ($42 billion); Amgen ($38 billion); Gilead ($32 billion); Allergan ($27 billion); Merck ($25 billion); Pfizer ($24 billion); and Novartis ($23 billion).
5. Companies – potential takeover targets – are cheaper today than five years ago
In 2016, the stock prices of many companies fell. And, of course, for the magnates of the market, this is a favorable moment to conclude a purchase transaction.
When determining which companies can become takeover targets, experts pay attention to companies that already have approved products. Many large companies do not have the opportunity to buy developments at an early stage, as they need a profit. Therefore, they are aimed at buying companies with already approved products.
Analysts suggest that in the queue for the takeover this year are:
Acadia
Over the past six months, this company has been repeatedly called a potential takeover target. Among the potential buyers were companies such as Pfizer, Biogen, Gilead and Teva. It is not yet possible to say for sure whether someone will buy Acadia, however, such speculation began due to the fact that Acadia meets the list of qualities that Loncar designated as qualities of a potential candidate for purchase. Her drug Nuplazid has been approved for the treatment of patients with Parkinson's disease. In addition, it can be used in the treatment of some other diseases including Alzheimer's syndrome, psychosis and schizophrenia.
Incyte
Incyte is a company that, thanks to its scientific developments, has created several medicines and is constantly investing in its own research. Incyte's main product is Jakafi, which is used to treat rare forms of cancer. Sales growth is significant. And among the key drugs there are medications that are used to treat rheumatoid arthritis, skin diseases, and cancers. Nine more products are under development. It is the combination of a strong scientific base and high profit growth rates that makes the company a desirable object for purchase.
BioMarin
BioMarin has five approved medicines, and annual sales exceed $1 billion, which makes the company another desirable object for purchase. The company's other two products are also awaiting approval. So, among the approved drugs are the drug Brineura for the treatment of Batten's disease, pegvaliase for the treatment of phenylketonuria. BioMarin also has medications such as BMN 270 – gene therapy for the treatment of hemophilia. And, in addition, medicines for the treatment of a rare disease called Sanfilippo disease.
Tesaro
This company has a drug called rolapitant, which is used to treat nausea during chemotherapy. In addition, another drug is under development, which may become very popular after it enters the market. It is a medication used in the treatment of cancer. Work on it is coming to the end.
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24.01.2017