Buyout mania has definitely taken over the biopharma industry lately. With the year winding down, we've witnessed numerous transactions in the space at absolutely gobsmacking premiums. Here is a brief overview of the biggest deals over the past two months.
| Buyer | Company Acquired | Buyout Premium |
|---|---|---|
| Astellas Pharma | Audentes Therapeutics | 105% |
| Merck | ArQule | 104% |
| Sanofi | Synthorx | 170% |
| Novartis | The Medicines Company | 25% |
Best of all, this trend should endure well into the new year. Several top pharmas, after all, are currently dealing with major patent expires, novel competition entering the marketplace, as well as pressure from lawmakers to rethink their drug pricing policies.
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Which biotechs could be the next to be bought out? Amarin (AMRN +1.83%) and Aurinia Pharmaceuticals (AUPH +1.65%) are two names that have the assets to attract a suitor in 2020. Here's what investors need to know about these top buyout candidates right now.
Amarin: The stage is set
After a positive advisory committee vote for Vascepa's proposed label expansion as an add-on to statin therapy in patients with stubbornly high triglyceride levels last month, Amarin arguably stands out as a perfect bolt-on acquisition for several big pharmas. The reason is that Vascepa should be able to generate at least $2 billion in annualized sales with this broader label in hand. The Food and Drug Administration is expected to issue a final decision on the drug's label expansion application before the end of the year.
What's more, Amarin appears to be built for a takeover. The company has no other product candidates in the pipeline at the moment, it doesn't have the financial capacity to both build a pipeline from scratch and promote Vascepa properly, and there's no doubt that Vascepa would be significantly more valuable in the hands of a big pharma. The bottom line is that management is likely to at least entertain potential suitors once Vascepa's label is a known quantity.
That said, price could be a sticking point. Management clearly believes that Vascepa has Lipitor-like sales potential, but suitors may not be willing to pay that kind of price tag. In that case, Amarin's best bet might be to strike a co-promotional deal with a big pharma or blue chip biotech. Such a move would maximize Vascepa's commercial potential, while simultaneously creating the leverage needed to demand top dollar in a buyout later down the line.
Aurinia: An unexpected turn of events
On Dec. 4, Aurinia reported positive late-stage results for its lupus nephritis medication voclosporin, causing its shares to jump by an eye-popping 125% in a single day. However, Wall Street clearly didn't have high expectations for voclosporin's lupus nephritis trial leading into this top-line data readout. As proof, the biotech's shares were down by a noteworthy 27% for the year just one month prior to this all-important data reveal.
The big deal is that this single indication could be worth upwards of $1 billion in annual sales at peak, according to some analysts. Moreover, voclosporin should enjoy a virtual monopoly for lupus nephritis for perhaps several years -- that is, assuming the FDA ultimately green-lights the drug for this indication. That's the kind of commercial opportunity that tends to attract big pharma suitors.
What's next? Aurinia plans to file for the drug's approval with the FDA sometime in the first half of next year. Before this regulatory filing ever sees the light of day, however, Aurinia could fetch a sizable takeover offer. The long and short of it is that the biotech now sports a well-differentiated product candidate with strong late-stage data. So, if management chooses to go the buyout route, there should be ample interest from big pharma.
