M&A, Perspective

Buzz: This little biotech has so much going against it, somebody is going to want to buy it. Right?

It’s the week after JPMorgan was dominated by M&A news, so let’s get started on the rest of the year by talking about which biotechs are being groomed for an acquisition.

Company number 1 fits the bill perfectly.

Alder $ALDR has a lot going against it. The biotech has secured a last-place finish for itself among the CGRP migraine players after stumbling over its development schedule for eptinezumab and executing a management shakeup. It’s essentially a one-drug company, with a tiny staff going up against marketing giants like Amgen and Novartis and Eli Lilly and Teva. Even if it wins an approval for its late-stage drug and goes on to launch in 2020, how does it expect to sell the therapy?

Leerink analyst Geoffrey Porges answers each negative with a positive, and then hammers down the “for sale” sign on the virtual front lawn.

Geoffrey Porges

That last place finish? Hey, those big companies can give away drugs and establish what he believes will be a mega blockbuster market. Alder has the only IV therapy in the bunch, has the potential to execute a great partnership or would make a great bolt-on — after the appropriate mark-up to a battered share price. The market cap is at $742 million this morning, making this a small portion of an M&A meal for some likely buyer.

Porges all but solicits a bid from Biogen, which needs to do some deals, noting how epti fits in well to a neuroscience portfolio. He notes:

Alder is now engaged in active partnership discussions with much larger companies about establishing a commercial partnership for epti in Europe and other territories. The company acknowledged recently that they would prefer for such a partnership to be in place before the MAA is filed in Europe, which would mean mid to second half of 2019. Such partnership discussions always have the risk of blossoming into acquisition discussions, and we believe this is particularly likely in the case of Alder.

Risk? Well, that’s one way to put it.

Eli Lilly’s decision to buy out Loxo’s organ-agnostic pipeline of cancer drugs helped set the tone for the beginning of this year, following GSK’s Tesaro buyout and the stunning announcement that Bristol-Myers is buying Celgene for $74 billion. The shopping spree has put M&A front and center at biotech. It’s no coincidence that these moves are being made after the sector got mauled in a bear market. Prices have come down on Nasdaq and no one can overlook the increasing pressure on pharma to bulk up on new products if it can’t raise prices as it has in the past.

As a result, the buzz factor on M&A is going to be intense. That was evident after rumors floated around that Pfizer was interested in buying Amarin, another one-drug wonder that has spurred lots of speculation about the potential of its drug Vascepa.

This conversation is just getting started. Look for lots more chatter ahead.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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