Please ensure Javascript is enabled for purposes of website accessibility

Biotech Buyouts That Would Be Great for Investors

By Keith Speights and Brian Orelli, PhD – Oct 22, 2021 at 7:05AM

Key Points

  • Leading gene-editing biotechs CRISPR Therapeutics and Intellia are likely to be acquired at some point.
  • Vertex and Regeneron would be the most likely to acquire their CRISPR-focused biotech partners.
  • Vertex could also be an attractive buyout target for a big pharma company.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Any biotech acquisition is a good one -- at the right price, of course.

Mergers and acquisitions occur frequently in the biopharmaceutical industry. And there are often rumors of other deals that never materialize. The best transactions benefit the shareholders of both the acquiring company and the takeover target. In this Motley Fool Live video recorded on Oct. 13, Fool contributors Keith Speights and Brian Orelli discuss potential biotech buyouts that would be great for investors.

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.

See the 10 stocks

 

*Stock Advisor returns as of September 17, 2021

 

Keith Speights: All right, Brian. Now, let's take a speculative twist in our discussion about acquisitions. We've just talked about two deals that have been announced this week. But Brian, is there a biotech buyout that you would really like to see? Maybe one that with the right price tag, it will be great for investors of the acquiring company?

Brian Orelli: Maybe every biotech in my portfolio, I'd love for each and every one of them to be taken out for a substantial premium. I don't know. There's some people who say that they're disappointed because a company got taken out because they'd rather own the company and profit from the growth of that company individually.

But the way I see it, there's plenty of biotechs in the sea to reinvest those profits. If you're going to give me a quick up-front profit, I'm definitely going to take it and I'm not going to complain about it.

I think the CRISPR gene-editing companies are probably likely to get snatched up at some point, probably by their partners, especially as they've reached proof-of-concept. I'm thinking Intellia (NTLA -3.19%) potentially being acquired by Regeneron (REGN -0.83%), and CRISPR Therapeutics (CRSP -5.21%) potentially being acquired by Vertex Pharmaceuticals (VRTX -0.40%).

I think these would be great for the investors, mostly because I think maybe their valuations are a little inflated. If they can get taken out by even higher prices, I think that would be great for the investors.

I own Vertex so I certainly don't want Vertex overpaying for CRISPR Therapeutics. Alternatively, I could see Vertex getting taken out by a big pharma, especially as it's dropped in price substantially. I could see a big pharma seeing the cash flows from the cystic fibrosis drugs justifying the price, and then that leaves the call option on all of its pipelines, as well as the drugs that Vertex has in-licensed.

Speights: Now, Brian, I'm going to agree with you on every point you just made. No. 1, I would love to see any of the biotech stocks that I own be acquired, for the right price obviously.

No. 2, I agree with you that the CRISPR gene-editing companies are probably near the top of the list of potential acquisition targets over the next few years. I also agree with you that Vertex, if there's going to be one of those massive big pharma mergers like we've seen over the last 20 years, some of those massive deals, I think Vertex would be an excellent candidate to be acquired by a bigger company.

I'm not sure. We'll see if that happens, but I think it would be one of the top megamerger acquisition candidates that are on the market right now.

Orelli: I think a pharma that wanted a lot of cash flow, but also wanted to boost up their pipeline, Vertex probably has more external deals than it has internal candidates. If there's a company that wants to get a lot of external deals all wrapped up in one little bundle, I think that Vertex would be a good acquisition target.

Keith Speights owns shares of Vertex Pharmaceuticals. The Motley Fool owns shares of and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.