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.
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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.