Vertex Pharmaceuticals (VRTX -1.02%) certainly has the cash to acquire smaller biotechs. However, there's also a possibility that the company could be an acquisition target itself. In this Motley Fool Live video recorded on June 23, Motley Fool contributors Keith Speights and Brian Orelli discuss what the odds are that Vertex is involved in a big acquisition within the next few years.
10 stocks we like better than Vertex Pharmaceuticals
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Vertex Pharmaceuticals wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 7, 2021
Keith Speights: Brian, you're in San Diego, not Las Vegas. But I'm going to ask you to be an oddsmaker for a second here. Just plucking numbers out of the air, what would you say the odds are that Vertex could either be acquired or be in a merger of equals?
Brian Orelli: In the next five years?
Speights: Let's say the next five years.
Orelli: Five years. I'd say maybe 1 in 4, 1 in 5 something in that range. I think it's probably a pretty good chance, maybe even 1 in 3 in the next year. If you've given me five years, I think that's probably a reasonable guess.
I think they can certainly grow on their own. They could certainly become a has-been on their own, but I think at some point maybe it just depends on the valuation, whether big pharma wants to go out and buy the revenue as a form of income and what the valuation is of the company relative to the income that it's bringing in.
Speights: What about the odds that Vertex acquires a smaller biotech say in the $5-10 billion range?
Orelli: In the next five years?
Speights: Yeah. [laughs]
Orelli: A hundred and ninety-eight percent? I mean, assuming they don't get acquired, then maybe subtract out whatever that likelihood is out of 100, and that's probably what the likelihood that they acquire something, I mean, what else are they going to do with their money?
I guess they could start giving out a dividend or start buying back a ton of shares, but I feel they can probably do better by going out and licensing or acquiring a lot of drugs.
Maybe it's a little bit lower because they might use the money for licensing instead of for acquisitions, but if we're talking about, just are they going to add to the pipeline, from outside of Vertex's drug discovery unit, I think that's a 100% guarantee.
