A number of takeover deals were recently announced, including a buyout of Adolor Corp (ADLR) for about $190 million by Cubist Pharmaceuticals (CBST). Adolor shares surged about 135% on the news, as the shares went from about $1.92, all the way up to $4.53 per share. Read more on the Adolor buyout deal here. With many large pharmaceutical companies sitting on huge amounts of cash and since that cash is earning almost nothing due to the low interest rate policy by central bankers and the Federal Reserve, more deals are likely. There is no doubt that we will see more small biotech stocks surge in buyout deals in the coming months. In fact, there is a strong chance buyout activity will heat up in the next couple of weeks since many companies will want to take advantage of generally low valuations. Many companies are hoping to complete deals now because the market correction has pushed many stocks below fair value and that makes the buyout targets cheaper to buy now. Here are a few companies that could heat up soon and even be the target of a buyout:
Catalyst Pharmaceutical Partners, Inc. (CPRX) shares are trading for about $1. Catalyst has exclusive worldwide licenses to commercialize CPP-109 and CPP-115. The company is working on a clinical trial, the majority of which (about $7.2 million) is being paid by the government. The trial is for CPP-109, "Vigabatrin" to treat cocaine addiction. Two drug addiction treatments from Reckitt Benckiser have achieved blockbuster status with combined U.S. sales of over $1 billion. This shows that Catalyst has the potential to bring a blockbuster drug to market. Cowen, Zacks Investment Research and other top analyst firms have recently started to cover Catalyst and have given the shares a buy or outperform rating with price targets ranging from $4 to $7 for CPRX shares. Catalyst investors could get good news soon as the company has set a goal for a possible partnership agreement. Catalyst recently announced a small secondary offering (about $3 million) at $1.15 per share and that knocked the stock down from about $1.45 to around $1. The good news is that a capital raise is out of the way now and the shares are providing a rare buying opportunity at about 45% below where the stock was trading just weeks ago. This company has a pipeline with blockbuster potential and larger biotech or pharmaceutical companies could find Catalyst to be an attractive takeover target. Management may have sensed some type of takeover potential recently as they just adopted a stockholder rights plan which they say is "designed to provide adequate time for the Board of Directors and the stockholders to assess an unsolicited takeover bid for the Company, to provide the Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value if a takeover bid is made, and to provide stockholders with an equal opportunity to participate in a takeover bid and receive full and fair value for their common shares." Read more on that here. I believe Catalyst could have a run like Inhibitex (INHX) which went from about $1 to over $9.
Chelsea Therapeutics (CHTP) is trading around $4.56. CHTP is a biotechnology company, based in North Carolina. These shares have traded in a range between $3.25 to $8.20 in the last 52 weeks. The 50-day moving average is $4.34 and the 200-day moving average is $4.44. Chelsea is pursuing an orphan drug strategy for a drug called Northera (Droxidopa) which is for the treatment of hypotension. (Yes, that's Hypotension, not hypertension.) This treatment has been approved and marketed in Japan for over 15 years, and generates about $50 million in revenue in that country. Recently, Chelsea released positive data on this drug and it caused an analyst to raise the price target to $18 due to their belief this will be approved early in 2012, see that here. I believe Chelsea is a low risk, high potential biotech stock. The new drug application for Northera could be approved in the first quarter of 2012. That is not long to wait for what could be exceptional gains.
Acorda Therapeutics (ACOR) is trading around $32. Acorda is a biotechnology company, based in New York. These shares have traded in a range between $18.36 to $33.48 in the last 52 weeks. The 50-day moving average is $21.94 and the 200-day moving average is $25.35. ACOR is estimated to earn about 71 cents per share in 2011 and 58 cents in 2012. Acorda has seen a surge in revenues from sales of their multiple sclerosis drug called "Ampyra". An analyst at Cowen Healthcare Royalty Partners views Acorda as a likely takeover target. You can watch that video interview here.
Human Genome Sciences, Inc., (HGSI) shares are trading at $8.74. HGSI is a biopharmaceutical company and is based in Maryland. These shares have a 52 week range of $8.71 and $30.15. The 50-day moving average is $11.74 and the 200-day moving average is $20.99. Earnings estimates for HGSI are for a loss of $1.97 per share in 2011, and a loss of $1.25 for 2012. Analyst estimates for revenues are seen at about $130 million in 2011, and are expected to surge to about $308 million in 2012. That type of growth is hard to find, so this stock should be a good rebound candidate after having a tough 2011. One investment manager said he believes HGSI could be acquired. You can read more on that here.
Alnylam Pharmaceuticals, Inc. (ALNY) is trading around $6.74. ALNY is a biotechnology company, based in Massachusetts. These shares have traded in a range between $5.88 to $12.34 in the last 52 weeks. The 50-day moving average is $7.18 and the 200-day moving average is $8.80. ALNY is estimated to lose about $1.29 per share in 2011 and post a loss of about $1.81 per share for 2012. In the product development pipeline, Alnylam has candidates for Huntington's disease, liver cancer, RSV infections, anemia and more. Alnylam has a very strong balance sheet with about $173 million in cash. The market capitalization is currently about $288 million, but after you consider the cash on the balance sheet, the enterprise value is only around $123 million. That's too low for the potential this pipeline has and it also makes this company an attractive takeover target.
Adolor Corporation (ADLR) is trading around $4.69. Adolor is a biotechnology company, based in Pennsylvania. These shares have traded in a range between $1.09 to $4.75 in the last 52 weeks. The 50-day moving average is $2.82 and the 200-day moving average is $2.03. ADLR is estimated to lose about 16 cents per share in 2011 and post a loss of about 49 cents per share for 2012. In the product development pipeline, Alnylam has candidates for Parkinson's disease, gastrointestinal diseases, and more. This company received a buyout offer from Cubist Pharmaceuticals and the stock when on to rise from lows of about $1 to nearly $5 per share. Those kind of gains make biotech investing worthwhile.
The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.