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Five biotech takeover targets – MoneyWeek

ComedianChrisRockreferredtothistrend,notingthatdrugcompanieskeepnamingsymptomsuntiltheyfindonethatyouhave:

Areyousad,areyoulonely,areyouhot,areyoucold?

Yougottatakethispill!

Andtheydonteventellyouwhatthepilldoestheyjustkeepnamingsymptoms。

Isawacommercialtheotherdaythatsaid,Doyougotobedatnightandwakeupinthemorning?

Igotthat!

Imsick,Ineedthatpill!

Americasbigpharmaceuticalcompaniespushtheirdrugsonthepublicharderthananystreetcornerdealer–anditsproventobeahighlyeffectiveandlucrativestrategy。

In2009,forexample:Merckearned$12。

9billiononsalesof$27。

4billion;Pfizerearned$8。

6billiononrevenueof$50billion;Novartisearned$10。

3billiononsalesof$44。

3billion。

Goodnewsforthem。

Butwhataboutinvestors?

Theclockisticking

Theresahugeproblemloomingforthesemammothpharmaceuticalcompanies。

Startingassoonasnextyear,manyblockbusterdrugswilllosetheirpatentexclusivity,whichwillopenthefloodgatestogenericdrugcompetition。

PfizersmassiveLipitordrugisoneofthem。

Badnews,consideringitgenerated$11billioninsaleslastyear。

Another$3billionworthofdrugswillalsogogenericnextyear。

Anditgetsworsein2012。

Over$30billionworthofbrand-namedrugswillfacecheapercompetition。

ThatincludesMercksSingulair,PfizersViagraandForrestLabsLexapro。

SowhataretheBigPharmafirmsdoingaboutit?

Biotechsonthebuyoutblock

Theexecutivesatthesedruggiantsarentsittingaround,sippingCognacandreminiscingabouttheglorydays。

Theyrebusybuildinguptheirdrugpipelinesbypartneringwithothercompanies。

Insomecases,theyreacquiringthemoutright。

Andnotalltheobjectsoftheiraffectionaretinybiotechsthatrequirearollofthediceandalargetoleranceforrisk。

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Already,weveseenRochebuymajorbiotechfirm,Genentech。

Andanotherbigbiotech,Genzyme(Nasdaq:GENZ),isreportedlyatargetofSanofi-Aventis。

GlaxoSmithKlineandJohnsonJohnsonarealsobeingmentionedaspossiblesuitorsofGenzyme。

Hereareafewothersthatcouldbeacquiredinthenext12to18months。



BristolMyersSquibb(NYSE:BMY):Overthepastfewyears,thislargecapdrugcompanyhasbeenrepositioningitselfasabiopharmaorganization。

WhileitlosesitspatentexclusivityonPlavixnextyear,Bristol-Myershasadeepdrugpipeline。

WithinitaresomeverypromisingcancerdrugsthatthefirmacquiredwhenitboughtMedarexlastyear。

WhileBristol-Myersboastsamarketcapofover$42billion,itsstillsmallenoughandattractiveenoughforoneofthedruggiantstoacquireit。

Rightnow,itstradingatareasonablevaluationandoffersadividendyieldofover5%。



Biogen(Nasdaq:BIIB):WithasoliddrugpipelineandablockbustermultiplesclerosisdruginTysabri,whichdoesntfacegenericcompetitionuntil2015,Biogencouldbeanattractivetakeovertarget。

ActivistshareholderCarlIcahnispushingforthecompanytobesold。



Celgene(Nasdaq:CELG):SomeofthehealthcaremediaarespeculatingthatCelgenecouldbeboughtout,too。

ManylargecappharmaceuticalcompanieswouldloveCelgenesoncologyportfolio,its$2。

6billioninannualsalesandearningspershareofover$2。

However,thestockisalreadytradingattakeover-likevaluation。

ItshardtoimagineapharmaceuticalcompanyCEOjustifyingpayingapremiumoverCelgenescurrentprice。



BioMarin(Nasdaq:BMRN):IfthecompaniesImentionedamomentagoareinterestedinacquiringGenzymeforitsrarediseasedrugs,theyshouldconsiderBioMarininthisarea,too。

BioMarinspecializesinrarediseases,whosedrugscommandpremiumpricing。

Additionally,BioMarinhasalreadyprovenitcanbringdrugstomarket,asitsexpectedtogeneratenearly$400millioninsalesthisyearandearn$0。

10pershare。

BottomLine:Manypharmaceuticalandbiotechstocksarecheaprightnow。

Andwithdemandformedicineonlyincreasingandthepotentialformergersandacquisitionsinthesectorheatingup,nowisagoodtimetotakealookatthegroup。



Thisarticle?

waswrittenbyLouisBaseneseandwasfirstpublishedinthedailyinvestmentnewsletterInvestmentUon28July2010。

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