Big pharmaceutical and biotech companies are gobbling up companies in an effort to more rapidly build out their drug pipeline. These acquirers have billions of dollars sitting on their balance sheets ready to be deployed. As you can hear in this interview Jeffries biotech analyst Michael Yee, "more buyout candidates are coming".
Nearly all bio-tech companies, big and small are a buyout target now. The big acquirers will most likely come from this group, OTCQX:RHHBY, BIIB, MRK, PFE, MRK and ABBV. These companies have already been active acquirers and there is currently no end in sight.
Three stocks, in particular, that are currently undervalued and have a portfolio that could enhance an acquirers portfolio are ALDR, PKTX and SRPT. These companies are very different from one another but what they do have a few things in common. They each:
- Have stocks that are undervalued
- Have interesting prospective drugs/products in the pipelind
- Have market caps that can easily be digested in a buyout
ALDR has an interesting drug currently in Phase 3 trials. The drug, eptinezumab, is used to migraines and was submitted for FDA apporval in February. The stock is off nearly 50% from its 12 month high. That brings their market cap to under $1 billion. With FDA approval pending and the relatively low market cap, Adler is sure to command a premium at these levels.
OTCQB:PKTX is likely a company you've never heard of. It has an anti-aging molecule called AAGP. Very simply put, AAGP enhances cell life and survivability. The molecule can be used for nearly anything imaginable. Cancer treatment, organ transplants, diabetes treatment, retinal regeneration, the list goes on and on. One area that I think makes them a particular interesting biotech candidate is the molecule's potential use in immunotherapy. The molecule is currently being tested for various applications and is also in human trials for diabetes treatment. It currently trades at just over .17 and has a paltry $43 million market cap. The company's CEO has been buying at an unprecedented rate. This may seem like and unlikely candidate but for comparison sake, MRK recently purchased Peloton Therapeutics for over $1 billion with incentives that could bring the price to over $2 billion. Peloton is a clinical stage and yet still commanded a $2 billion price tag.
SRPT is by far the biggest of the three companies. It is currently trading just over $121, that is 25% off of its 12 high. SRPT is focussed on gene therapy. Gene therapy companies have been particularly targeted recently. Earlier this year Biogen purchased NITE at a nearly 70% premium in an all cash deal. Roche's offer to buy startup gene therapy company Spark, ONCE came at over a 100% premium. Now is a good time to be in the up and down world of gene therapy stocks.
Disclosure: I am/we are long SRPT, pktx.