Anticipating Long-Term Developments
Justin Collishaw, a Frost & Sullivan industry analyst, said that investors should look longer term, since the hepatitis market is expected to grow beyond hepatitis C, encompassing drugs developed for other forms of the virus, where Achillion’s knowhow can prove valuable to a buyer.
“By 2020, I would say hep G is going to be at least a $10-billion market, so a company like Achillion has, I think, extreme attractiveness, and they have a [range] of wholly owned products with no partnerships in place, so they can be comfortable about their results,” said Collishaw. “All [Achilion] would have to do is get a small slice of that pie, and they would get a higher valuation than what they’re trading at today.”
Another potential M&A target, Collishaw said, is Theravance, which develops small molecule drugs for respiratory disease, bacterial infections, and central nervous system pain. Its sole marketed product is Vibativ for MRSA-caused nosocomial pneumonia. One sign of big biopharma interest in Theravance: In May, Elan agreed in principle to pay $1 billion for a 21% royalty participation interest in potential future payments related to four respiratory programs in which Theravance is partnering with GlaxoSmithKline. The programs are Relvar™ or Breo™ Ellipta™ (approved that month by the FDA for COPD); Anoro™ Ellipta™; bifunctional muscarinic antagonist-beta2 agonist monotherapy (GSK961081/MABA '081); and vilanterol monotherapy.
Elan shareholders, already sour on Royalty Pharma’s hostile bid for their company, rejected the deal the following month.
BioMarin and Medivation also turned up last month in a Jim Cramer list of takeover targets that included Seattle Genetics. He cited the company’s antibody-drug conjugate licensing agreements with 12 biopharmas—including giants such as AbbVie, Bayer, Genentech, GlaxoSmithKline, and Pfizer—that have generated more than $225 million for the company.
As more biotechs go public in a market now smiling on biopharma, the takeover target lists of analysts can be expected to lengthen in the short term. The long term is harder to figure out, though investors seeking clues might look less to the Wall Street herd and more to basic criteria, such as success in finding niches to dominate with first-in-class drugs, building pipelines, collaborating with others, and translating years of research and trials into millions or billions in sales.