Viewed simply by dollar value, the value of mergers-and-acquisitions (M&A) activity appeared to be zooming in the first half of this year: Statistics compiled for GEN by Informa Pharma Intelligence’s Medtrack and Strategic Transactions services showed a total $184.05 billion worth of deals for which values were disclosed, up nearly 38% from the $133.73 billion recorded for January–June 2018.
But a closer look at those numbers, as well as the number of deals, tell a different tale. For one thing, roughly half the transactions recorded in both years were undisclosed. Of those deals whose values are known, nearly three-quarters (74%) of the total combined value of M&A transactions announced in the first half of this year reflected two multi-billion-dollar deals: Bristol-Myers Squibb’s (BMS) planned $74 billion buyout of Celgene, and AbbVie’s planned $63 billion purchase of Allergan.
Even more remarkable, nearly half (46%) of the total value of first-half 2018 deals came from a single acquisition, Takeda Pharmaceutical’s purchase of Shire, a deal valued at £46 billion (which Informa valued at the dollar-equivalent upon announcement of $63.328 billion, but which as of September 4 was only worth about $56 billion given the intervening plunge in the value of the U.K. pound).
Informa Pharma Intelligence tallied 153 biopharma M&A deals in the first six months of 2019, up 21% from 126 in the year-ago period. Informa’s list of deals includes businesses in two areas where consolidation has driven recent deal-making activity: Tools and technologies enable development of new treatments, as well as contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs).
Those companies were not included in the M&A tallies of another watcher of biopharma commercial activity. Vantage’s six-month review of biopharma activity based on EvaluatePharma data (registration required) included a tally of deals by drug developers showing just 62 transactions in the first half of 2019, down from 83 in January–June 2018.
What companies will be among those whose M&A is tracked in coming months? Below are 10 biopharmas that have been speculated by analysts and other market watchers as the subject of buyout activity in recent months, based on notes to investors and comments in news outlets. For each company mentioned, this list explains where talk of acquisitions has surfaced, and why.
While none of the 10 Takeover Targets to Watch in 2019 highlighted by GEN on January 28 had found a buyer (as of September 5), one came very close last month, judging from Wall Street speculation and the resulting news reports. That previous A-List also highlighted several companies that found buyers within two years of being mentioned by GEN for generating significant buyout buzz.
Alexion Pharmaceuticals shares jumped briefly last month after Spanish news outlet Intereconomia reported Amgen was close to acquiring Alexion for $200 a share, only to start slipping once Amgen announced plans to acquire Celgene’s Otezla® (apremilast) for $13.4 billion. On August 30 shares fell 10%, to $100.58, after the U.S. Patent and Trademark Office agreed to review a petition, filed in February, challenging three patents for Alexion’s best-selling drug Soliris® (eculizumab). The petition was filed by Amgen, which is developing a biosimilar of Soliris called ABP 959.“It still doesn’t mean that an early biosimilar entry is inevitable, just that it is more potentially likely now than it was before,” SVB Leerik analyst Geoffrey Porges wrote in an August 30 note to clients reported by Investor’s Business Daily. Just a week earlier, Porges described Alexion as “a highly attractive, fungible, accretive asset that is likely to be materially more valuable in the hands of a diversified company (given current market sentiment and preferences) than it is alone.”
As GEN noted earlier this year, other analysts linked the company to suitors ranging from Amgen (Ronny Gal of Sanford C. Bernstein), to BioMarin Pharmaceutical (Bret Jensen, writing in Seeking Alpha) to “Roche, Pfizer, or Novartis” (Zacks Investment Research).
Alexion’s profitability has led to takeover talk. Nearly all (88%) of Alexion’s 2018 net product sales, and about 82% of January–June 2019 net product sales, came from Soliris, which on June 27 won an additional U.S. approval in adults with neuromyelitis optica spectrum disorder (NMOSD). A successor drug, Ultomiris® (ravulizumab-cwvz), won U.S. approval in December and has since added approvals in Europe and Japan for adults with paroxysmal nocturnal hemoglobinuria (PNH).
|NCT01492361), which Amarin said showed Vascepa generating a 25% relative risk reduction in first occurrence of major adverse cardiovascular events.
“Overall, we predict the FDA will approve the drug given clearly significant (and transformative) evidence of benefit for an unmet need,” Jefferies analyst Michael Yee wrote in an investor note that reiterated his firm’s “buy” rating on Amarin stock.
Amarin has said it will proceed with the $400 million offering and sales force doubling as planned.
An additional indication will further boost Vascepa’s net product revenue, which during January–June 2019 jumped 80% year-over-year, to $173.097 million from $96.313 million. Nearly all (99%) of Amarin’s total revenue comes from Vascepa, first approved in 2012 as an adjunct to diet to reduce triglyceride levels in adults with severe hypertriglyceridemia. Amarin’s rising sales sparked rumors this year of the company being bought by Pfizer, Amgen, Novartis, and Novo Nordisk.
|the first one in 2013. In CNBC appearances on February 25 and March 6, Michael Yee of Jefferies included BioMarin among his short list of companies ripe for being bought.
Morningstar included the company on its list of prime targets for M&A: “BioMarin offers the greatest growth potential, albeit off a smaller base, with a solid rare-disease drug foundation poised to expand in 2020 with val rox and vosoritide launches. Gene therapy expertise should be a draw for potential acquirers.”
bluebird bio scored its first product approval on May 29 when the European Commission granted conditional marketing authorization for Zynteglo™ (autologous CD34+ cells encoding βA-T87Q-globin gene), a gene therapy for patients aged 12+ with transfusion-dependent β-thalassemia (TDT) who do not have a β0/β0 genotype. By the end of this year, bluebird expects to launch a rolling BLA with the FDA for Zynteglo in the same indication.
“By this time next year, Zynteglo should be picking up sales momentum. Analysts predict the gene therapy could reach blockbuster sales levels in the future,” Keith Speights predicted in The Motley Fool. “But don’t count on massive sales for Zynteglo next year.”
The reason, said Speights, is the time bluebird will need to negotiate reimbursement agreements with individual European countries, based on Zynteglo’s high list price of €1.575 million ($1.7 million)—though bluebird noted that payment would hinge on the gene therapy’s effectiveness, and would stretch over five years.
“BLUE’s potential lies with its proprietary technology and its focus on gene therapies,” wrote Genia Turanova in StreetAuthority, who included bluebird among five “potential acquisition targets” on January 22. Also in January, Jeff Reeves of MarketWatch tagged bluebird as one of three “potential takeover targets” in biopharma.
bluebird’s pipeline includes idecabtagene vicleucel (ide-cel or bb2121), an anti-BCMA CAR T cell therapy being co-developed with Celgene for relapsed/refractory multiple myeloma. Celgene has said a BLA submission is planned in the first half of 2020. Another candidate, Lenti-D™, is expected to generate updated clinical data from the Phase II/III Starbeam trial (ALD-102; NCT01896102) by year’s end, and is also under study in a Phase III open-label trial (ALD-104; NCT03852498).
Clovis Oncology president and CEO Patrick J. Mahaffy began 2019 by refusing to rule out a buyout: “We’re open to it. It just has to happen organically,” he said during a Q&A session at the J.P. Morgan 37th Healthcare Conference, as Christopher Venutolo noted in Seeking Alpha.
However, investors hoping for news of a Clovis acquisition by a larger biopharma were sorely disappointed August 7, when the company instead announced it would raise $225 million in convertible senior notes due 2024 through a private placement. Shares of Clovis, which had already declined 76% year-over-year, skidded another 11% to $5.83 on August 8, and have fallen since then to $5.12 on September 4.
The private-placement announcement capped a day in which Clovis’ shares had fallen 6.7% after AstraZeneca (AZ) and Merck & Co. reported positive results from the Phase III PROfound trial of AZ’s Lynparza (olaparib) in men with HRR* mutation-selected metastatic castration-resistant prostate cancer (mCRPC). Lynparza is a rival PARP inhibitor to Clovis’ Rubraca® (rucaparib).
Over the first half of 2019, Rubraca net product sales have risen 56% year-over-year, to $66.096 million, Clovis reported on August 1. Yet a few days later, BofA/Merrill Lynch analyst Tazeen Ahmad downgraded Clovis’ stock from “buy” to “neutral,” citing the heightened prospect of Rubraca facing competition from Lynparza in prostate cancer since AstraZeneca is now likelier to pursue approval for Lynparza this year based on results from PROfound.
“Investors had once expected Clovis Oncology to be a prime buyout candidate, but a lack of interest has started to spook investors,” Maxx Chatsko cautioned September 4 in The Motley Fool.
Incyte’s JAK inhibitor Jakafi® (ruxolitinib) crossed the billion-dollar “blockbuster” threshold in 2018 with $1.387 billion in net product revenue. For the first six months of 2019, Jakafi revenue ran 19% over last year at $785.117 million—not including $102.466 million in royalty revenue from licensing the drug to Novartis outside the U.S.
Those numbers should grow over the next year; the FDA on May 24 approved a third indication of steroid-refractory acute graft-versus-host disease in patients ages 12+, joining two rare blood cancer indications in polycythemia vera and myelofibrosis.
Another potential future indication for Jakafi is facial vitiligo, judging from positive results in a Phase IIb trial (NCT03099304) presented in June at the World Congress of Dermatology. Beyond Jakafi, Incyte also receives royalties from Eli Lilly, with which it partnered to develop the arthritis treatment Olumiant® (baricitinib).
Jakafi’s clinical and commercial success has made Incyte a long-discussed takeover target, as does its relatively small market capitalization (about $17 billion as of September 5). “Incyte’s strong oncology portfolio makes it a lucrative target for companies like Gilead, Amgen, and Bristol Myers,” Zacks Equity Research concluded in an unbylined June 20 post on its “Analyst Blog.” Two days earlier in Investopedia, Timothy Smith included Incyte among “potential takeover targets for large drug makers.”
Those commentaries continued months of buyout speculation for Incyte. The company was among 10 biopharma takeover targets in a Bloomberg News survey of 20 M&A/event-driven trading desks, analysts, and fund managers; among cancer treatment developers included as “potential buyout targets” by David Russell, writing in TradeStation Market Insights; and one of 10 companies on the “Biotech Buyout Watchlist for 2019” published by stock website PrecisionTrade365.
Nearly all of Neurocrine’s revenues come from the once-daily tardive dyskinesia treatment Ingrezza® (valbenazine), which generated $316.975 million in net product sales during January–June 2019, up 89% from $167.991 million a year ago.
Dale Ratner Hershman, a/k/a “The Sick Economist,” on April 28 identified Neurocrine among three potential buyout candidates for one biotech giant: “Biogen could still purchase this promising growth pipeline without straining its own finances too much.” But Biogen’s M&A appetite has so far proven more limited, having acquired ophthalmology gene therapy developer Nightstar Therapeutics for approximately $877 million.
Added Cory Renauer in The Motley Fool: “Neurocrine’s team could also teach Biogen how to pick winners from unlikely places.”
Renauer cited Neurocrine’s licensing of BIAL’s opicapone, now under FDA review as an adjunctive treatment to levodopa/carbidopa in patients with Parkinson’s disease experiencing OFF episodes. Opicapone has a PDUFA target action date of April 26, 2020. He also cited Neurocrine’s collaboration with Voyager Therapeutics to develop Voyager’s gene therapy candidates VY-AADC for Parkinson’s disease and VY-FXN01 for Friedreich’s ataxia.
Neurocrine placed fourth among companies viewed as potential takeover targets by 74 respondents to an RBC Capital Markets survey. Aaron Levitt wrote in InvestorPlace that the company was a suitable acquisition for AbbVie—before AbbVie announced plans to buy Allergan for $63 billion.
AbbVie is Neurocrine’s partner in marketing and developing Orlissa® (elagolix), approved last year as the first oral gonadotropin-releasing hormone (GnRH) antagonist for women with moderate-to-severe endometriosis pain. Last month, the companies announced their NDA submission seeking approval for elagolix for management of heavy menstrual bleeding associated with uterine fibroids in women.
This summer has been a summer to remember for Sage Therapeutics, given its launch on June 24 of Zulresso™ (brexanolone), the company’s first marketed treatment—and the first treatment specifically indicated for postpartum depression.
“In many ways, the story of Sage is only in the early chapters,” wrote Jeff Reeves in MarketWatch on March 25. While some investors remain nervous about Sage not partnering Zulresso or its pipeline candidates with biopharma giants, Reeves asserted that the pipeline is broad enough for the company not to need them: “Sage is a first-mover here, and it has plenty of other drugs in the pipeline to prove it’s not a one-trick pony.”
Since then, the first patients were treated with Zulresso in July—the same month that Sage trumpeted positive results for SAGE-217 in bipolar depression in the Phase II ARCHWAY Study (NCT03692910), as well as analysis of datasets from previously completed clinical studies in major depressive disorder and post-partum depression showing positive signals for potential development of SAGE-217 in generalized anxiety disorder and treatment-resistant depression (TRD).
Sage said August 6 it plans to launch a clinical study assessing SAGE-217 in TRD, with the timing to be disclosed at a later date.
In another indication, major depressive disorder, Sage on September 4 reported positive results from a Phase II trial (NCT03000530) in the New England Journal of Medicine showing rapid, statistically significant reduction in symptoms after 14 days of treatment with SAGE-217.
“Sage Therapeutics is another company focused on neurology that could be a perfect fit for Biogen,” Cory Renauer wrote in The Motley Fool.
The FDA last month stunned Sarepta Therapeutics on August 19, issuing a complete response letter (CRL) for Vyondys 53 (golodirsen) for Duchenne muscular dystrophy in patients with a confirmed mutation amenable to exon 53 skipping. The following day, investors sold off shares, shrinking the company’s stock price 15%, to $102.07.
While Sarepta cited, and responded to, FDA justifications for the CRL, Joseph Schwartz of SVB Leerink and Brian Abrahams of RBC Capital Markets were among analysts offering another explanation—the FDA’s controversial 2016 approval of Sarepta’s Exondys 51 (eteplirsen) despite negative recommendations by two advisory committees and over objections from some administrators. Sarepta agreed to conduct a confirmatory clinical trial; the company says that study is in progress.
The CRL followed the company’s August 8 disclosure of what it called an erroneous submission of an adverse event report to the FDA. Sarepta stock fell 6.5%. Days later, president and CEO Douglas Ingram bought 16,252 additional Sarepta shares, valued at just over $2 million, while three board members bought smaller numbers of shares. The opportunity perceived by insider buyers should continue fueling speculation that Sarepta remains ripe for takeover, Trent Welsh wrote in Seeking Alpha.
Sarepta topped RBC Capital Markets’ survey of companies viewed as potential takeover targets at the start of 2019. Michael Brush, writing May 2 in MarketWatch, called Sarepta “the next gene therapy company that could get taken out” despite it raising $375 million in a public offering. As late as August 28, AlphaStreet included Sarepta as one of “four biotech stocks that are ideal takeover targets.”
Seattle Genetics offers two reasons why market watchers have tagged the company as a takeover target. One is growing sales of its sole marketed drug Adcetris® (brentuximab vedotin) in the U.S. and Canada, which during January–June 2019 zoomed 35% year-over-year, to $293.981 million. At $158.98 million during Q2, Adcetris sales beat estimates of $149 million, analyst Kennen MacKay told clients, as reported by Investor’s Business Daily.
The other reason is the company’s clinical progress. On July 16, Seattle Genetics and partner Astellas Pharma submitted a BLA for enfortumab vedotin for locally advanced or metastatic urothelial cancer; the antibody-drug conjugate is designed to target Nectin-4. An approval would catapult Seattle Genetics into a multi-product oncology drug developer.
In July, president and CEO Clay Siegall, PhD, said the company expected to report topline data from the HER2CLIMB pivotal trial assessing tucatinib in HER2-positive metastatic breast cancer later this year. By the first half of 2020, Seattle Genetics expects topline data to emerge from the innovaTV 204 pivotal Phase II trial assessing tisotumab vedotin in metastatic cervical cancer (NCT03438396).
“Given growing sales of Adcetris and its heavy-duty cancer-focused pipeline, any biopharma looking to make a splash in oncology would seriously be considering SGEN stock,” Aaron Levitt wrote in InvestorPlace January 10.
Michael Yee of Jefferies included Seattle Genetics among his short list of companies ripe for buyout on two CNBC appearances February 25 and March 6. More than a month later, Dale Ratner Hershman, a/k/a “The Sick Economist,” said Seattle Genetics’ “robust cancer pipeline and rapidly growing revenue” made it one of his three potential buyout candidates for AbbVie.