With Alexion Off the Board, Amarin and Biomarin Are Attractive Acquisition Targets

After slumping in 2020, biopharma deals are expected to jump in the new year

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Dec 24, 2020
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Biopharma deal-making is expected to pick up in 2021 after its slump in 2020, with a good example being AstraZeneca's (AZN) nearly $40 billion purchase of Alexion Pharmaceuticals (ALXN), which was announced on Dec. 12. Industry observers are already predicting that, after the down year that was 2020, M&A activity will return to pre-Covid heights, according to an article in FiercePharma.

Fundamentals will be important, explained Arda Ural, Ph.D., Ernst & Young's Americas industry markets leader for health sciences and wellness. "Big Pharma companies have the balance sheets to deploy against M&A, and the need to go into therapeutic areas where they can create eminence," he said.

That seems to be precisely the reason AstraZeneca paid a 45% premium to add Alexion to the fold. "Alexion has established itself as a leader in complement biology, bringing life-changing benefits to patients with rare diseases," AstraZeneca CEO Pascal Soriot said in a statement. "This acquisition allows us to enhance our presence in immunology."

Jeffries analyst Jared Holz had previously put Alexion at the top of the list of biopharma companies that he expected big players to target. That's why I think it might be worthwhile for investors to take a look at the nine others that made Holz's list: Amarin Corporation Plc. (AMRN), Biomarin Pharmaceutical Inc. (BMRN), bluebird bio Inc. (BLUE), Deciphera Pharmaceuticals Inc. (DCPH), Esperion Therapeutics Inc. (ESPR), Global Blood Therapeutics Inc. (GBT), Immunomedics (IMMU), Iovance Biotherapeutics Inc. (IOVA) and Reata Pharmaceuticals, Inc. (RETA).

Until the AstraZeneca takeover of Alexion, there were 242 pharma and life sciences transactions announced in 2020, down 2.3% from the previous year, according to PricewaterhouseCoopers (PwC). The total value of those deals dropped more than 60% to about $140 million. PwC thinks 2021 M&A could be in the range of $250 billion and $275 billion, with several huge mergers of $50 billion or more.

In an interview with FiercePharma, Sky Milch of PwC stated companies will be on the lookout for acquisitions that fit in with their strategies. He estimated that as of December, the biopharma industry had nearly $1.5 trillion in capital that could be used for deals.

Ural said the Astra-Alexion marriage signaled what he thinks is a trend, i.e. the takeover of a U.S.-based firm by one overseas. "Global biopharmas are looking for assets in the U.S. for two reasons," he said. "Innovation is happening in the U.S. with the biotechs. And the tax penalties for coming to the U.S. have been mitigated, at least for now. That makes the U.S. a welcome target for nicely funded companies."

Holz thinks the most aggressive shoppers will be Amgen Inc. (AMGN), Biogen Inc. (BIIB), Bristol-Myers Squibb Co. (BMY), Gilead Sciences Inc. (GILD), GlaxoSmithKline (GSK), Johnson & Johnson (JNJ), Merck & Co. Inc. (MRK), Novartis (NVS), Pfizer Inc. (PFE) and Sanofi (SNY).

Disclosure: The author has positions in Amgen, Bristol-Myers, Gilead, Johnson & Johnson, Pfizer, and Sanofi.

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