7 takeover targets to look out for in 2017

A promising drug candidate, an innovative technology, a great business model or just a bunch of venture funding. Any one of those factors can prime a biopharma for success, yet is also likely to attract attention from industry peers and competitors.

In some cases, imitation is the highest form of flattery. The rapidly growing biosimilar space, for example, hinges on players including Novartis and Pfizer marketing copycat drugs that could siphon revenue away from rivals Amgen and Johnson & Johnson. Often, though, it can be easier both financially and operationally for a drugmaker to snatch up a shiny biotech to build out a portfolio or strike up a merger with a similarly-sized peer to challenge a heavyweight for market dominance.

Those latter options require a takeover target – a business with an intriguing asset that puts it on the radar of larger companies hungry for a deal. While 2016 wasn't a groundbreaking year for M&A, industry followers believe next year might see an uptick amid tax reforms under a new president, continued loss of patent protections for top-tier branded drugs and strong growth projections for promising fields such as gene editing and immuno-oncology.

With that in mind, here's a crop of takeover targets likely to make their way into the spotlight in 2017.


A gene therapy company, Spark is attractive for the diverse set of candidates it's investigating as well as the growth it has experienced as of late.

The company has treatments spanning from pre-clincial through Phase 3 for inherited retinal diseases (IRDs), hemophilia A and B, and fatal neurodegenerative disorders such as Batten's disease. Spark's lead candidate is voretigene neparvovec, a drug targeting IRD that received orphan and breakthrough designations from the FDA and that recently clinched positive results in Phase 3.

In August, CEO Jeffrey Marrazzo said his company planned to submit the drug in early 2017, which, if approved, would make it the first gene therapy for an inherited condition.

And at the American Society of Hematology's 2016 meeting, the company unveiled data from a Phase 1/2 trial showing its hemophilia drug co-developed with Pfizer was long-lasting, helping patients avoid spontaneous bleeding for two months up to one year.

Outside the lab, Spark has been active in locking down acquisitions and licensing deals. Earlier this month, the Philadelphia-based biotech dropped $10 million in cash to access Selecta Biosciences' synthetic vaccine particles technology platform. It also acquired fellow gene therapy provider Genable in March for $6 million in cash and 265,000 shares of Spark stock.


Oncology is currently the hottest market out there and PARP inhibitors have become one of the darlings of the space. In hopes of competing with AstraZeneca's LynparzaTesaro has its own PARP inhibitor. 

Tesaro has a handful of candidates in pre-clinical and Phase 1 trials, but its key treatment is niraparib. The company is testing the PARP inhibiting drug alone and in combination for indications including Ewing’s sarcoma, breast cancer and – most prominently – ovarian cancer.

In September, the FDA fast tracked the drug after it reached its primary end point in a Phase 3 study of more than 550 ovarian cancer patients. Tesaro submitted its New Drug Application for the treatment in early November.

"We think the demand for late stage oncology assets is high, especially in the PARP space given the potential for activity across a range of tumors," Credit Suisse analyst Alethia Young said in an October note on Tesaro. "For a large pharma player who already has an oncology salesforce and large R&D infrastructure we could see SG&A synergies of 50-75% and R&D synergies of 15-30%."


Biotechs shined during the rampant period of growth in 2015, with one standout being Axovant. Armed with just one candidate – an Alzheimer's treatment acquired from GlaxoSmithKline – the Bermuda-based company went public in June of that year, selling shares at $15 a pop and netting $315 million before producing any clinical data.

Axovant watched its stock quickly double to almost $30 per share. Despite setbacks in the space, the biotech is still attractive. 

Results of a Phase 3 trial for its lead candidate will come sometime in 2017. That's important, given the lack of treatments for mild to moderate Alzheimer's disease. As such, "the asset would be attractive to a broad group of companies if the data's positive," said JMP Securities analyst Jason Butler.


The rumor mill started turning again for the Cambridge, MA-based company this summer after CEO George Scangos stepped down and The Wall Street Journal reported that Allergan and Merck had approached the big biotech about a buyout.

Allergan's CEO Brent Saunders took little time to shoot down the rumors. Meanwhile, Merck's CEO Ken Frazier said during a third quarter earnings call that his company was not "limited by size or by phase" when it came to M&A, but also that is was more focused on bolt-on acquisitions.

With a market cap of just over $60 billion, Biogen would surely claim one of the highest price tags of any takeover target.

The company has a well-established neurology portfolio and pipeline, and it "would be a straightforward way for a big pharma to add exposure to this area, which we think should see higher productivity in coming years due to better understanding of diseases like Alzheimer’s, Parkinson's, and new ways of treating pain and rare genetic disorders," Morningstar analyst Karen Andersen said in an email. 


BioMarin specializes in enzyme replacement therapies targeting lysosomal diseases, which affect how much of a certain protein the body holds on to and can frequently cause enzyme deficiencies. That specialization is a benefit, according to Andersen, giving BioMarin the ability to operate "in areas of minimal or no competition, strong pricing power, and few generic or biosimilar threats."

Morningstar projected the Novato, CA-based biotech would see its revenue roughly triple to $3 billion by 2020 and begin to see sustained profitability after 2017. BioMarin reported annual revenues of $885 million in 2015.

Particularly interesting is the company's treatment that leads the area of gene therapies for hemophilia A, Andersen said. Big pharmaceutical developers have shown an interest in gene therapies for hemophilia, and have entered into small and large deals in the last year that have given them access to such treatments. They include Pfizer's acquisition of Bamboo in August for $150 million upfront and Shire's acquisition of Baxalta for $32 billion.


Vanda might raise more eyebrows than any of the targets mentioned thus far, in spite of murmurs that sprung up in 2009 that Novartis may be a potential buyer. But a Reuters report from September reignited speculation after citing sources who claimed the company was looking at strategic alternatives with the potential for a sale.

JMP's Butler cautioned from reading too deeply into speculation, but said Vanda is more attractive to potential buyers than it once was. The company now has two products on the market and those commercialized products brought in $38.5 million during the third quarter for the company, which sports a modest market cap of $746 million.

"From that perspective, the company has two assets which have longevity, which have growth potential in arguably attractive commercial markets, so they're going to garner attention from an M&A perspective," said Butler, who believes the company's non-24-hour sleep-wake drug could be a unique, valuable product to a number of big and mid-cap players.

"I don’t think they're looking to go out and sell the company," Butler said. "I think it would take somebody coming to them with an offer for something to happen. They also have a lot of cards to turn over in the next couple of years."


​Unlike the other entries on this list, Actelion almost didn't make it to 2017 before getting picked off.

Johnson & Johnson ended up acquiring the Swiss biotech on Jan. 26 for $30 billion. Shortly before that, it was competing with another drugmaking juggernaut, Sanofi, to woo the target into a sale. Johnson & Johnson admitted in mid-December it had taken several swings at a buyout, ultimately offering Actelion more than $27 billion, or about a 22% premium to the target's market cap at the time. The two drugmakers couldn't reach an agreement, though, which opened the door for Sanofi.

According to Bloomberg reports, the Paris-based company is particularly interested in Actelion's multiple sclerosis drug ponesimod, and is considering offering around $30 billion in a deal that could be inked before the month ends. As expected, the various deal talks helped the target's stock surge – it's up 40% to CHF222 ($215) per share since late November.

In the latest chapter of the takeover saga, deal talks have reopened between Actelion and Johnson & Johnson.

Part of Actelion's appeal comes from its well-established portfolio of pulmonary arterial hypertension treatments, with five in total. It also has two other marketed drugs: one for Gaucher's disease and one for skin conditions resulting from cutaneous T-cell lymphoma.

Johnson & Johnson ended up acquiring Actelion on Jan. 26 for $30 billion, or $280 per share — about a 23% premium from close-of-market the day prior.

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Filed Under: Mergers and Acquisitions / Deals
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