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4 biotech stocks that are ideal takeover targets

By Toby |

Speculation plays a big role when investing in biotech stocks, hence making them highly volatile. It could be after years of stock declines that a small biotech firm finally succeeds in developing a new therapy; so it often tests an investor’s rationality and patience to the extreme.

Takeovers are other events that make biotech investors rich overnight. Large pharma companies are always on the lookout for promising smaller firms, as acquisitions tend to be more efficient in terms of time and expense, over R&D for the expansion of product pipeline.

Healthcare giants such as Pfizer (NYSE: PFE), Merck (NYSE: MRK), Amgen (NASDAQ: AMGN) and AbbVie (NYSE: ABBV) keep their eyes open for cheap stocks that also have healthy candidates or blockbuster drugs in their kitty.  

pharma stocks
Image for representation (Photo by Drew Hays on Unsplash)

Amgen’s (NASDAQ: AMGN) recent decision to acquire Celgene’s (NASDAQ: CELG) Otezla business for $13.4 billion in a cash transaction gives confidence that more deals could be coming this way in the second half of the year. Hence it is important to have an idea about the stocks that could become takeover subjects.

Alexion Pharmaceuticals (NASDAQ: ALXN)

Alexion Pharmaceuticals is a lesson in biotech investing. This company was rumored to be a takeover target for Amgen for over a year, and the stock plunged over 5% when earlier this week Amgen announced the deal with Celgene. Rumors don’t always pan out, and when that happens, the stocks could suffer.

However, given the headstart Alexion has gained in treating multiple rare diseases, thanks to Soliris, the company continues to be a takeover target. Novartis (NYSE: NVS), Pfizer and Roche are expected to be the firms that could be interested in Alexion.

READ: 9 IPO stocks that have given 100+% returns

Amarin Corporation (NASDAQ: AMRN)

Earlier this year, rumor mills paired Amarin Corp with Pfizer and then with Novartis. However, there were no further reports of the companies engaging in any meaningful talks. The overwhelming success of Amarin’s fish oil drug Vascepa used in the treatment of cardiovascular disorders makes the $5.2-billion firm an ideal takeover target.

The Bedminster, New Jersey-based firm is currently studying the efficacy of Vascepa for other disorders. An acquisition could greatly benefit Amarin as well, as it would enable it to effectively market its drug under the wings of a bigger firm.

amarin revenue trend

BioMarin Pharmaceutical (NASDAQ: BMRN)

BioMarin stock is currently trading 30% lower than its yearly high, which makes it quite cheap. Add that to the fact that the company focuses on developing orphan drugs for rare diseases – a great combination for a bigger pharma company looking to invest in promising pipelines.  

Though BioMarin has not been profitable, its revenues increased 15% in 2018. It is also likely that BioMarin may consider acquiring Alexion, given both firms are conducting research in the same field.

READ: Major IPOs expected in late-2019 or 2020

Sarepta Therapeutics (NASDAQ: SRPT)

Sarepta is an expert in gene therapy and gene editing, an area that holds enormous scope in the coming days. It already has an FDA-approved medication marketed under the name Exondys 51, which is used to treat a rare genetic disease called Duchenne muscular dystrophy.

Sarepta also has a strong pipeline of over 20 experimental drugs under development. With a market cap of less than $7 billion, Sarepta should be an easy pick for acquisition.

Apart from these four, other strong candidates that you probably need to watch include Ionis Pharmaceuticals (NASDAQ: IONS), Immunomedics (NASDAQ: IMMU) and Intercept Pharmaceuticals (NASDAQ: ICPT).  

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

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