Over time and study, and a lot of speculation, one wonders with any small biotech, What if? What if we are bought out? Who might that be?
In recent days, Zalicus (ZLCS) investors learned the company had participated in a key Novartis (NVS) patent: "Method for Treating Haematological Cancers." What Novartis calls "surpisingly" in the patent (under "Description") must be since the patent states: "The synergism has been observed over a wide range of concentrations of the FGFR inhibitors. For example, the concentration of Compound A required to achieve 50% of inhibition of proliferation can be reduced by Dexamethasone by at least a million fold." (Ibid) A MILLION FOLD??? Or put into layman's language, the combination synergy of Novartis's cancer drug with dexamethasone was a mind-blowing discovery. As we learned, Zalicus's Chalice data analyzer played a key role: "Data analysis was performed using the Chalice software developed by CombinatoRx (Zalicus Inc., Cambridge, MA, USA)." (Ibid)
Thus, the company you hope is going to grow into a $50/share firm over time and patience suddenly becomes a very hot buy-out target. But if Zalicus were bought out, who might that be?
For Zalicus (ZLCS), I have ruled OUT Covidien (COV). The recent leak that Covidien is ready to cut loose Mallinckrodt and its pharmaceutical business confirms in my mind what I came to conclude late last year: Covidien is heading in a different direction and Zalicus isn't in their game-plan.
If we go back further in time, in the days of Neuromed (the Vancouver branch of Zalicus), Merck (MRK) cut a sweet deal with the Dr. Terry Snutch team, but later walked away from the ion channel project, particularly drug candidate NMED-160. In my opinion, the last company Zalicus wants to climb in bed with is Merck. Now that Snutch's NMED-160 has re-emerged as new and improved Z-160, I doubt the good scientist is ready to trust his 'baby' to Merck.
Therefore, shifting gears, one is always inclined to look at internal partners. For Zalicus, that's Novartis and Amgen (AMGN). Novartis could be favored for its recent patent leak (explained above) that has woken up the Market to the cHTS/cuHTS Chalice collaboration. If Zalicus could prove to be a cancer-producing machine for Novartis, the possibility of Novartis consuming Zalicus is always there. But meanwhile, there's the sleeping giant Amgen that's had a pilot 'dog & pony show' on the same technology. Amgen is very capable of stepping in and swallowing Zalicus whole. Nevertheless, there is the interesting relationship of Zalicus board member Todd Foley of MPM Capital who runs the Novartis Strategic Funds and a recent article suggests Novartis is getting ready to initiate new acquisitions.
However, there is another firm, a giant, of which Zalicus could be an excellent fit from top to bottom. I am thinking of Pfizer (PFE). Pfizer has a mega-huge oncology library and could very easily benefit from the cHTS/cuHTS Chalice technology asset at Zalicus-Cambridge. But that's not all. Pfizer has proven in recent days its commitment to the ion channel research at Icagen (ICGN). Zalicus-Vancouver is ion channels and I propose that Pfizer is ready to move ion channels into the pain market. In my estimation, there is a lot synergy here because Pfizer would also be gaining the Zalicus pipeline. But my main thought is Zalicus's technology platform at its two research centers is a perfect fit for Pfizer's business plan.
Were I in the business of helping firms look for companies to buy-out, I would be in the office of Pfizer's CEO making my case. I suggest Zalicus could be an excellent fit and easily bought out at current market prices for $10/share. Perhaps even much less on a hostile takeover.
Disclosure: I am long ZLCS.
