Mergers Among Biotech Stocks Could Rise In 2019

According to analysts at RBC Capital Markets, Sarepta Therapeutics, Sage Therapeutics and Loxo Oncology are the most likely takeover targets among biotechnology firms in 2019, reported Investor's Business Daily. Sarepta is working on a gene therapy in a muscle-wasting disease, while Sage has a number of drugs to treat depression and Loxo just gained approval for a cancer treatment.

"With small/midsized cap valuations having 'normalized' and large biopharma now better positioned to execute (mergers and acquisitions), we do expect to finally see meaningful pickup in acquisitions many predicted for years," the analysts said.

The news source noted that large biotechnology companies are facing a number of patent expirations in the mid-2020s. Among those, RBC notes a Gilead Sciences' HIV drug in 2025, Celgene's cancer treatment Revlimid in 2024-2026, and Amgen's arthritis and psoriasis drug Enbrel in 2019.

"In the meantime, the need to make up for lost sources of revenue and stimulate growth may encourage future M&A," RBC analysts said, adding they are "very bullish" on the prospects for mergers among biotech stocks in 2019.

The largest takeover this year was the $62-billion merger between Takeda and Shire, but excluding that transaction, the cumulative deal value for the others was $50 billion, well short of expectations for $100 billion, the news source said.

"Overall, we believe the key takeaway is that large biopharma is preferring smaller, earlier stage deals, private companies, or discounted late-stage assets as opposed to larger $15 billion-plus acquisitions we have historically seen in this space," RBC analysts said.