Allergan and Pfizer are considering a massive merger worth more than $330 billion, making it the biggest deal of the year if it goes through…
Shire PLC struck an all-cash deal to acquire Dyax Corporation at $6.5 billion shortly after acquiring NPS Pharmaceuticals at $5.2 billion.
Bristol-Myers Squibb is acquiring Cardioxyl Pharmaceuticals for just over $2 billion.
AstraZeneca PLC is buying ZS Pharma in a deal valued at more than $2.7 billion.
AbbVie agreed to acquire Pharmacyclics in a $21 billion deal.
In the first three months of the year, deals in the sector accounted for 10.5% of all global M&A activity. As of November 2015, the sector has seen $397.2 billion worth of deals this year alone…
All of which puts biotech right back in the spotlight…
More than 18% off its highs, the sector has struggled with political tweets, fears of bubbles, and overpricing concerns.
But that’s quickly changing for the better.
In fact, now 13% off September lows, the biotech sector is quickly being bid higher.
But things are just getting warmed up.
Competition is Intense
As competition heats up, bigger industry names are scared to death, hunting for drugs under development in an attempt to strengthen pipelines eroded by older products and potential loss of patent protection.
They’re partnering for access to new innovation, tax opportunities, and to take full advantage of an aging demographic dealing with a wide range of chronic and quite expensive issues.
In doing so, they’re pumping billions into smaller, more innovative firms.
All of which will contribute to a continued, healthy resurgence of biotech M&A activity for the foreseeable future. Tweets, bubble fears, and other concerns aside these are the biggest drivers of growth.
AstraZeneca’s $2.7 billion deal for Cardioxyl – for example – strengthens its cardiovascular and metabolic disease pipeline.
The deal gives it access to an ion-trap technology to develop novel treatments for hyperkalemia (high potassium levels), a serious condition of elevated potassium in the bloodstream that can lead to chronic kidney disease and chronic heart failure.
Now, there’s news Amgen is on the hunt for a $10 billion deal for a company with proven candidates in an effort to help falling sales with new blockbuster drugs.
Merck & Co. has noted acquisition targets look a bit more appealing after the fall, too, as it becomes more willing to do deals with patent losses taking their toll.
Third quarter 2015 results for example fell 4.6% to $10.07 billion as drugs – like Remicade – lost market share to lower cost versions of the anti-inflammatory drug, as pointed out by The Wall Street Journal.
Sanofi saw a downturn in its diabetes business because of a loss of patent protection, too.
Or look at hot specialty sectors of biotech like hepatitis C.
As I noted yesterday, companies like Achillion could be in play as targets for M&A.
Johnson & Johnson (JNJ) is pairing ACHN’s drug with Olysio, testing to see if the combination over a four, six, and eight-week treatment works over the current standard treatments that last 12 weeks. If the combination therapy were to work well in trials, the stock could be off to the races and perhaps open it up to speculation as a target.
The big guys of the sector must either adapt to the new environment of incessant competition and loss of patent protection or simply cease to exist as a moneymaker. It’s why so many of them are on the hunt for M&A activity.
The activity we’re seeing in this sector alone is not slowing. There’s no reason for it, too.
Bottom line – pay very close attention to smaller, and mid-sized names with up and coming pipelines. It’ll open the door for many profitable opportunities along the way.