Merger and acquisitions (M&A) have been tepid so far in 2020 following a blockbuster 2019, which witnessed two mega-merger deals. There have been several small ticket acquisitions in 2020 including some billion-dollar offers. The COVID-19 pandemic resulted in a shift in focus to development of vaccine and treatments for the deadly disease, which has taken 1.65 million lives so far.
However, recently AstraZeneca announced the biggest deal of the year, offering to buy biotech major, Alexion Pharmaceuticals for almost $39 billion. Another pharma giant, Eli Lilly, followed in with a billion-dollar offer to buy gene therapy biotech, Prevail Therapeutics.
Both AstraZeneca and Lilly, and other pharma companies that announced M&A deals earlier this year are particularly looking to diversify their pipeline into newer avenues of drug discovery and development. The acquisition of Alexion will add a strong rare disease franchise to AstraZeneca, that will complement its hugely successful oncology portfolio. With the acquisition of Alexion, AstraZeneca is likely to gain 10 promising candidates which will likely be launched by 2023. Meanwhile, the acquisition of Prevail Therapeutics will add pre-clinical and clinical-stage gene therapy programs to Lilly’s pipeline, a new and attractive avenue.
Given that it takes several years and millions of dollars to develop new therapeutics from scratch, large pharmaceutical companies, sitting on huge piles of cash, prefer to buy innovative small/mid cap biotech companies to build out their pipelines. We expect other pharma companies to follow suit to boost their pipeline amid rising competition and dwindling sales of legacy drugs. The focus will primarily be on companies with either rare disease candidate or gene therapies in their pipeline.
Companies with pipeline candidates that target rare disease are likely to demand higher price due to lower competition. Meanwhile, gene therapies are in focus with several companies targeting to develop a one-time gene therapy-based treatment for diseases. This newer avenue of treatment also has potential to earn high revenues as very few companies have been successful in developing an effective gene therapy. Cost synergies in research and development (R&D) plus sales and marketing are also added benefits.
Moreover, several companies in the biotech sector have taken a beating in 2020 due to the COVID-19 pandemic that has disrupted clinical studies and hurt sales of many drugs. Below we discuss companies that have a gene therapy or rare disease / rare cancer pipeline candidate in their pipeline. Moreover, stocks of these companies have not fully recovered the stock-market crash in March 2020, suggesting attractive valuations.
BioMarin Pharmaceutical Inc. BMRN
Companies that have a product portfolio/pipeline of rare disease drugs are in great demand as it is a less competitive space and the expensive treatments can bring in huge profits. BioMarin is one such drug developer. Its market cap is $15.4 billion.
BioMarin has six commercially approved rare disease drugs with some more in the pipeline. The company also has gene therapies in its pipeline. Although the company’s lead gene therapy candidate, roctavian, for treating hemophilia A received complete response letter (“CRL”) in May 2020, the company believes that the candidate will receive an approval following availability of required data. The CRL asked for two-year follow-up data from the phase III study evaluating it which will be available late next year. Progress toward its potential approval may attract acquisition offers.
The company’s stock is up 5.6% so far in 2020. BioMarin has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BioMarin Pharmaceutical Inc. Price
BioMarin Pharmaceutical Inc. price | BioMarin Pharmaceutical Inc. Quote
uniQure N.V. QURE
This company is a promising player in the gene therapy space. It is engaged in creating a pipeline of innovative gene therapies that have been developed both internally and through its collaboration, focused on cardiovascular diseases, with Bristol Myers-Squibb. The company’s lead candidate AMT-061, an experimental AAV5-based gene therapy incorporating the FIX-Padua variant, is being evaluated in the phase III HOPE-B pivotal study for the treatment of patients with severe and moderately severe hemophilia B.
Uniqure has a market cap of $2.1 billion. Stock of this Zacks Rank #3 company is down 33.6% year to date.
uniQure N.V. Price
uniQure N.V. price | uniQure N.V. Quote
REGENXBIO Inc. RGNX
The company is a clinical-stage biotechnology company that focuses on the development, commercialization and licensing of recombinant adeno-associated virus gene therapy. The company’s most advanced candidate, RGX-314, is being evaluated in a phase I/IIa for treating wet age-related macular degeneration (“AMD”). Apart from RGX-314, the company is also developing three other gene therapy candidates for treating certain rare neurological symptoms.
REGENXBIO’s market cap is $1.6 billion. Currently, the company carries a Zacks Rank #3. So far this year, shares have gained 5.9%.
REGENXBIO Inc. Price
REGENXBIO Inc. price | REGENXBIO Inc. Quote
Deciphera Pharmaceuticals, Inc. DCPH
The company’s lead pipeline candidate, Qinlock received FDA approval in May 2020 for the treatment of advanced gastrointestinal stromal tumor (“GIST”), a rare form of cancer. The company is also developing the drug in a late-stage study for treating GIST in a different treatment setting. It also has several pipeline candidates targeting oncology indications.
This Zacks Rank #3 company has a market cap of $3.2 billion. The stock is down 10.5% so far this year.
Deciphera Pharmaceuticals, Inc. Price
Deciphera Pharmaceuticals, Inc. price | Deciphera Pharmaceuticals, Inc. Quote
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
