Top Biotech Takeover Targets for 2020: Are These The Best Stocks to Buy Now?
More than 25 merger and acquisitions have been executed in the biotech sector in 2019. The volume of 14 transactions was higher than $1 billion. With an amount of $74 billion in cash and stocks, the acquisition of Celgene by Bristol-Myers Squibb (BMS) has been the second biggest merger in the history of biopharmaceutical industry.
It is very likely that this trend will also continue in 2020 and 2021. There are constantly lots of buyout rumors in the news about potential biotech takeover candidates and targets. Here is an up-to-date list of our top merger and acquisition candidates with the potential of a massive buyout premium in the case of a takeover. But are these also the best stocks to buy now?
Myovant Sciences is a small pharmaceutical company which was founded in 2016. In April 2016, the company entered into a license agreement with Takeda Pharmaceutical and was thereby granted with the exclusive and worldwide rights (excluding Japan and other Asian countries) to develop and commercialize Relugolix, a small molecule antagonist of the gonadotropin-releasing hormone (GnRH) receptor. Since then, Myovant has successfully established Relugolix as a potential blockbuster drug in two different markets.
Firstly, Relugolix is being developed for the treatment of men with androgen-sensitive prostate cancer. In November 2019, Myovant announced impressive results of its phase 3 study named HERO, demonstrating a 97% response rate of men taking a once-per-day Relugolix pill.
Secondly, Relugolix has also been tested as a treatment for so-called uterine fibroids. Uterine fibroids are non-cancerous tumors which develop inside the uterine wall, a condition which might result in excessive bleeding. Relugolix has demonstrated significant improvements of this bleeding activity in another phase 3 trial in 2019.
After a potential approval of Relugolix by healthcare authorities which we expect to happen during this or next year, Myovant will be competing with much larger pharmaceutical companies such as AbbVie or AstraZeneca in both, the prostate as well as the uterine fibroid market. In addition, the company is still burning through cash at a significant rate, an issue which most likely won’t change before 2021. From our experience, it is exactly the combination of these two factors which make Myovant an ideal takeover target for larger pharmaceutical companies. With a market cap of around $1.03 billion, Myovant would still be a bargain for most big pharmaceutical companies.
Deciphera Pharmaceuticals is specialized on precision oncology. In 2019, the company dominated the headlines with strong results for its cancer drug Ripretinib. Ripretinib showed convincing efficacy and safety data in patients with gastrointestinal stromal tumors (GIST). Deciphera now plans to file a new drug application for Ripretinib in the first quarter of 2020.
In addition, Deciphera has a highly promising pipeline with various drug candidates. The company is still the only owner of the rights for the development and commercialisation of these pipeline projects, making Deciphera a very interesting takeover target for a potential buyer. Market cap: $ 2.82 billion.
Clovis Oncology’s lead drug Rubraca is indicated for the treatment of ovarian cancer. Rubraca has been approved in 2013 and is currently being investigated in a number of additional clinical trials for indications such as breast, prostate, pancreatic, or lung cancer. Clovis’ shares have gained more than 200% since November. However, with a market cap of around $566 million, the company would still be a bargain for most big pharmaceutical companies.
Shares of Axsome Therapeutics soared more than 3500% last year after the company has announced a number of positive clinical trial results in 2019. On December 16, the stock rose again by more than 70% after the presentation of the results for its late-stage depression drug AXS-05. With a market cap of $3.35 billion, the company is clearly not cheap anymore.
Takeover rumors around Alexion Pharmaceuticals exist already since a few years. The specialist for rare disease drugs would be an ideal partner for big pharmaceuticals such as Novartis, Amgen, or Pfizer. Market cap: $21.82 billion.
Incyte has a very attractive drug portfolio. Jakafi, a drug for the treatment of rare blood cancers, already reached blockbuster status. With Olumiant and Iclusig, the company has two additional drugs on the market. A third will most likely follow in 2020 as we expect the FDA approval for Pemigatinib for the treatment of cholangiocarcinoma during the second quarter of 2020. Market cap: $21.44 billion.
Gene therapy companies have been popular takeover targets in the past. For instance, AveXis was bought in 2018 by Novartis for $8.7 billion. Roche just received the go-ahead for the acquisition of the US gene therapy player Spark Therapeutics. Sarepta Therapeutics is one of the next gene therapy specialists that could get taken out. The company has several approved gene therapies for the treatment of Duchenne muscular dystrophy and undertakes major efforts to expand its pipeline to other neurologic diseases. Market cap: $9.31 billion.
Amarin is a pharmaceutical company focusing on the development of novel therapeutics for cardiovascular diseases. With Vascepa, the company has already an FDA-approved drug. In December 2019, the label of Vascepa was extended to a broader use. Sales of Vascepa have been growing last year. In October, an independent drug price committee released a report saying that Vascepa is a cost-effective option for CV risk reduction. Market cap: $2.98 billion.
BioMarin is a biotech jewel committed to the development of medicines for hemophilia and orphan diseases. In addition, the Americans have a very robust pipeline, and steadily growing revenues. Market cap: $ 16.85 billion.
These companies belong to the top takeover candidates in biotech industry for 2020 and 2021. But does this also mean that they are the best stocks to buy now?
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