Who’s in line for the next big mega-merg­er? Morn­ingstar hand­i­caps the odds among the top play­ers

The M&A deals we’ve al­ready seen in Q1 have whet­ted an­a­lysts’ ap­petite for much, much more. And Morn­ingstar has come up with its break­down of the top buy­ers like­ly scour­ing the in­dus­try for takeovers — as well as the top tar­gets.

And more mega-merg­ers, they say, are very much on the ta­ble in 2019.

Lack of growth through 2022 at Am­gen and Gilead, in com­bi­na­tion with healthy ex­pect­ed cash flows and fair fi­nan­cial health, gives them the de­sire and am­mu­ni­tion for large-scale deals, al­though the best pair­ings (Am­gen/As­tra and Gilead/Re­gen­eron) are made less like­ly by the strong val­u­a­tions of their in­tend­ed tar­gets. J&J, Mer­ck, and Pfiz­er al­so have the abil­i­ty and de­sire to bol­ster their port­fo­lios with big­ger deals, and their shares are rel­a­tive­ly strong cur­ren­cy; we think the Mer­ck/Lil­ly fit is strong enough to counter Lil­ly’s high­er val­u­a­tion, and Pfiz­er could con­sid­er buy­ing Bris­tol af­ter the Cel­gene ac­qui­si­tion if val­u­a­tions re­main com­pelling, as this would great­ly ex­pand its on­col­o­gy port­fo­lio and pipeline. No­var­tis could raise enough cash to do a large deal fol­low­ing the Al­con spin-off and the po­ten­tial sale of its stake in Roche, and Ab­b­Vie could be an in­ter­est­ing fit for its on­col­o­gy and im­munol­o­gy port­fo­lios. We think Ab­b­Vie (sig­nif­i­cant debt, un­der­val­ued shares) and Roche (strong pipeline, fo­cused on on­col­o­gy tuck-ins) will stick to small­er deals, and Sanofi is like­ly to con­tin­ue its rare-dis­ease fo­cus with So­bi (the oth­er half of Biover­a­tiv’s busi­ness) and Bio­Marin (rare dis­ease with gene ther­a­py ex­per­tise).

Now for the tar­gets in play:

Ab­b­Vie, Am­gen, and Gilead are present on both our ac­quir­er and tar­get lists, as they have sig­nif­i­cant growth is­sues but al­so com­pelling pipelines and, in the case of Ab­b­Vie and Gilead, are un­der­val­ued. We think Bio­gen could be a tar­get for a num­ber of firms, as its neu­rol­o­gy fo­cus, strong pipeline, and un­der­val­ued shares would make it a very large-scale tuck-in ac­qui­si­tion. Bio­Marin is small enough to be ac­quired by any of the oth­er names, and its rare-dis­ease fo­cus and gene ther­a­py are ar­eas of high in­ter­est in the in­dus­try. Re­gen­eron isn’t a per­fect fit with all firms, and its shares look fair­ly val­ued, but strong Eylea cash flows, po­ten­tial block­buster sales in pain, and a large, ear­ly-stage on­col­o­gy pipeline could be ap­peal­ing, par­tic­u­lar­ly as Re­gen­eron and Sanofi have re­cent­ly de­fined their im­muno-on­col­o­gy col­lab­o­ra­tion and giv­en Re­gen­eron full rights to sev­er­al pro­grams.

There’s been plen­ty of crit­i­cism of the mega-merg­ers that oc­curred a decade or more ago. But Morn­ingstar says things could be dif­fer­ent this time around:

Strate­gi­cal­ly, while megamerg­ers of­ten fail to see the cost syn­er­gies laid out at the deal’s an­nounce­ment and can be cost­ly for R&D pro­duc­tiv­i­ty, we think they do put firms in a bet­ter po­si­tion to fight con­sol­i­da­tion among pay­ers and PBMs, if done smart­ly. That is, gain­ing ac­cess to a larg­er port­fo­lio of drugs in a giv­en ther­a­peu­tic area gives a drug firm more lever­age to ne­go­ti­ate prices on drugs in that port­fo­lio, as deny­ing one drug could mean high­er prices for the re­main­ing port­fo­lio. Firms with­out a clear ther­a­peu­tic area fo­cus may al­so be more like­ly to do deals.

As Nas­daq en­rolls the fi­nal batch of 2019 IPOs, how have the num­bers com­pared to past years?

IGM Biosciences’ upsized IPO haul, coming after SpringWorks’ sizable public debut, has revved up some momentum for the last rush of biotech IPOs in 2019.

With 39 new listings on the books and roughly two more months to go before winding down, Nasdaq’s head of healthcare listings Jordan Saxe sees the exchange marking 50 to 60 biopharma IPOs for the year.

“December 15 is usually the last possible day that companies will price,” he said, as companies get ready for business talks at the annual JP Morgan Healthcare Conference in January.

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A fa­vorite in Alex­ion’s C-suite is leav­ing, and some mighty sur­prised an­a­lysts aren’t the least bit hap­py about it

Analysts hate to lose a biotech CFO they’ve come to trust and admire — especially if they’re being blindsided by a surprise exit.

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David Grainger [file photo]

'Dis­con­nect the bas­tard­s' — one biotech's plan to break can­cer cell­s' uni­fied de­fens­es

Chemotherapy and radiotherapy are the current gladiators of cancer treatment, but they come with well-known limitations and side-effects. The emergence of immunotherapy — a ferocious new titan in oncologist’s toolbox — takes the brakes off the immune system to kill cancer cells with remarkable success in some cases, but the approach is not always effective. What makes certain forms of cancer so resilient? Scientists may have finally pieced together a tantalizing piece of the puzzle, and a new biotech is banking on a new approach to fill the gap.

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While No­var­tis ban­ish­es Zol­gens­ma scan­dal scars — Bio­gen goes on a Spin­raza 'of­fen­sive'

While Novartis painstakingly works to mop up the stench of the data manipulation scandal associated with its expensive gene therapy for spinal muscular atrophy (SMA) Zolgensma— rival Biogen is attempting to expand the use of its SMA therapy, Spinraza. 

The US drugmaker $BIIB secured US approval for Spinraza for use in the often fatal genetic disease in 2016. The approval covered a broad range of patients with infantile-onset (most likely to develop Type 1) SMA. 

Jason Kelly. Mike Blake/Reuters via Adobe

Eye­ing big ther­a­peu­tic push, Gink­go bags $290M to build a cell pro­gram­ming em­pire

Ginkgo Bioworks is on a roll. Days after publicizing a plan to nurture new startups via partnerships with accelerators Y Combinator and Petri, the Boston biotech says it has raised another $290 million for its cell programming platform to reach further and wider.

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UP­DAT­ED: Speak­er Nan­cy Pelosi to un­veil bill for fed­er­al­ly ne­go­ti­at­ed drug prices

After months of buzz from both sides of the aisle, Speaker Nancy Pelosi will today introduce her plan to allow the federal government to negotiate prices for 250 prescription drugs, setting up a showdown with a pharmaceutical industry working overtime to prevent it.

The need to limit drug prices is a rare point of agreement between President Trump and Democrats, although the president has yet to comment on the proposal and will likely face pressure to back a more conservative option or no bill at all. Republican Senator Chuck Grassley is reportedly lobbying his fellow party members on a more modest proposal he negotiated with Democratic Senator Ron Wyden in July.

Jeff Kindler's Cen­trex­ion re­news bid to make pub­lic de­but

Jeffrey Kindler’s plan to take his biotech — which is developing a slate of non-opioid painkillers — public, is back on.

The Boston based company, led by former Pfizer $PFE chief Kindler, originally contemplated a $70 million to $80 million IPO last year— but eventually postponed that strategy. On Wednesday, the company revived its bid to make a public debut in a filing with the SEC — although no pricing details were disclosed.

Zachary Hornby. Boundless

'A fourth rev­o­lu­tion in can­cer ther­a­pies': ARCH-backed Bound­less Bio flash­es big check, makes big­ger promis­es in de­but

It was the cellular equivalent of opening your car door and finding an active, roaring engine in the driver seat.

Scientists learned strands of DNA could occasionally appear outside of its traditional home in the nucleus in the 1970s, when they appeared as little, innocuous circles on microscopes; inexplicable but apparently innate. But not until UC San Diego’s Paul Mischel published his first study in Science in 2014 did researchers realize these circles were not only active but potentially overactive and driving some cancer tumors’ superhuman growth.

Scott Gottlieb, AP Images

Scott Got­tlieb is once again join­ing a team that en­joyed good times at the FDA un­der his high-en­er­gy stint at the helm

Right after jumping on Michael Milken’s FasterCures board on Monday, the newly departed FDA commissioner is back today with news about another life sciences board post that gives him a ringside chair to cheer on a lead player in the real-world evidence movement — one with very close ties to the FDA.

Aetion is reporting this morning that Gottlieb is joining their board, a group that includes Mohamad Makhzoumi, a general partner at New Enterprise Associates, where Gottlieb returned after stepping out of his role at the FDA 2 years after he started.

Gottlieb — one of the best connected execs in biopharma — knows this company well. As head of FDA he championed the use of real-world evidence to help guide drug developers and the agency in gaining greater efficiencies, which helped set up Aetion as a high-profile player in the game.

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