Biotechnology is one of the sectors that are very dependent on mood swings in politics, especially where it comes to prices for medicines. And now companies that operate in this sector have every reason to feel uncomfortable.
Many analysts believe that 2017 will be a year of acquisitions in the industry.
Here are a few deals that were recently concluded:
- Takeda Pharmaceutical bought the manufacturer of medicines for cancer treatment Ariad Pharmaceuticals.
- Derma Sciences: the company’s shares rose 40% after the company gave permission for the takeover of Integra LifeSciences.
- CoLucid Pharmaceuticals shares also rose by 32% on the news that it will be bought by Eli Lilly.
- Valeant Pharmaceuticals has decided to sell the Dendreon Pharmaceuticals to the Chinese company Sanpower Group.
And that is just a start. Analysts predict that we are waiting for interesting news and deals in 2017 in biotechnology.
Below are five reasons which give grounds for analysts to make such conclusions.
1. Biotechnology companies themselves say that they are on the brink of an acquisition
Late last year, Ernst & Young conducted a survey, according to which 43% heads of biotech companies have stated that they have five or more deals in the work compared with only 6% in April last year. The head of Gilead John Milligan said recently in an interview that the acquisition will be the “key” part of what the company will do in the new year to promote their products.
2. The large pharmaceutical companies are running out of ideas
It is easy to understand why the heads of major companies are lining up for the takeover of smaller firms. Last year, the Office of the US Food and Drug Administration approved only 22 new drugs. This is the lowest since 2010 and less than half of the 45 drugs that were approved in 2015. This means that many companies are dependent on fewer products.
A good example is a company Celgene, which last year reported a profit of $11.2 billion, and nearly $7 billion have been received for a medicine Revlimid for the treatment of cancer.
3. They also do not have enough tricks to increase profits
Large companies resort to various tricks, such as increasing prices, placing headquarters in countries that are classified as “tax havens” category and many other ways to increase profits. The problem with these methods is that they really do not create long-term value for shareholders, and these methods can not be used all the time because at some point all these tricks come to an end.
4. Biotechnology companies have great potential for the conclusion of such transactions
Now more than ever, they have the capacity needed for the conclusion of such transactions. According to analysts Ernst & Young, this potential is estimated at approximately $600 billion. However, this amount may increase by at least $100 billion, if the American companies are going to be allowed to repatriate their profits at a favorable interest rate. It is this plan the politics in Washington discuss.
Among the companies with the highest potential for acquisition are the following: Johnson & Johnson ($42 billion); Amgen ($38 billion); Gilead ($32 billion); Allergan ($27 billion); Merck ($25 billion); Pfizer ($24 billion); and Novartis ($23 billion).
5. Companies that could be potential targets for acquisitions currently cost less than five years ago
Due to the fact that in the past year the stock prices of many companies have fallen, at the moment they are much cheaper and, consequently, it is the best time for large companies to make a deal on the purchase.
Companies that are waiting for their takeover
To determine which companies can be targets for acquisitions, we should pay attention to those companies that already have the approved products. Many large companies do not have opportunities to buy the developments in the early stages, as they need a profit. Therefore, they focus on buying companies which have the products already approved.
Below are the companies which, according to analysts, can be absorbed in 2017 by larger competitors.
Over the past six months, the company has repeatedly called a potential target for acquisition. The companies such as Pfizer, Biogen, Gilead and Teva were named among the potential buyers. While we can not say for sure whether someone buys Acadia, but such speculation was triggered by the fact that Acadia meets a list of characteristics, that Loncar designated as features of the potential candidates for purchase. It’s medicine Nuplazid has been approved for the treatment of patients with Parkinson’s disease. Furthermore, it can be used to treat other diseases including Alzheimer’s disease, psychoses, and schizophrenia.
Incyte has developed several medications because of its scientific research and is constantly investing in its own research. The main product of Incyte is Jakafi, which is used to treat a rare form of cancer. Sales growth is significant. And among key products, there are medications used to treat rheumatoid arthritis, skin diseases, cancer. Nine products are under development. The combination of a strong science base and high levels of profit growth makes the company a desirable object for purchase.
BioMarin has five approved medications, and the annual sales exceed $1 billion, making the company another desirable object for the purchase. Two other company’s products are also expected approval. Thus, among the approved medications is the Brineura medicine to treat Batten disease, Pegvaliase for the treatment of phenylketonuria. BioMarin has also medications such as BMN 270 – the gene therapy for the treatment of hemophilia, as well as medicines for the treatment of a rare disease called Sanfilippo disease.
This company has medicine entitled Rolapitant, which is used to treat nausea during chemotherapy. In addition, another drug is in development that can become very popular after it enters the market. This drug is used in the treatment of cancer. Its development is close to the final stage.