These days, it seems like biotech buyout offers are falling from the sky. During the week ended Dec. 6, AbbVie (ABBV 2.52%) announced not one but two big acquisitions.
The pharma giant's latest big buyout offer is for Cerevel Therapeutics (CERE +0.00%), a clinical-stage company developing treatments for schizophrenia and other neurological conditions. Despite not having any approved products to sell yet, AbbVie offered Cerevel $8.7 billion in cash, or $45 per share.
NASDAQ: CERE
Key Data Points
AbbVie's offer came in about 22% above Cerevel's stock price when the market closed on Dec. 6 and 73% more than its closing price on Dec. 1.
On Nov. 30, AbbVie also made waves by agreeing to acquire ImmunoGen (IMGN +0.00%) for $10.1 billion, or $31.26 per share. This was an even juicier offer that valued the commercial-stage cancer drug developer 95% above its previous day's closing price.
NASDAQ: IMGN
Key Data Points
Not just AbbVie
Patents that protect market exclusivity for prescription drugs are relatively short-lived. AbbVie's Humira had an incredible run, but billions in annual sales started evaporating in front of investors' eyes when lower-cost biosimilar versions launched in the U.S. earlier this year.
Patent cliffs are an industrywide issue that big pharmaceutical companies solve by partnering with less established drugmakers or acquiring them outright. Biopharmaceutical dealmaking tends to come in waves that peaked during the height of the COVID-19 pandemic and then collapsed in 2022.
NYSE: ABBV
Key Data Points
AbbVie's recent offers for Cerevel Therapeutics and ImmunoGen suggest another wave of acquisitions is just around the corner. Could your favorite biotech be the next to attract a buyout offer that sends its stock price soaring?
To gauge the likelihood of your favorite biotech stock getting a buyout offer, you'll need to know what's inspiring big pharmaceutical companies these days.
| Date | Acquirer | Company Acquired | Field | Commercial or Clinical Stage | Total Consideration | Price Per Share | Premium |
|---|---|---|---|---|---|---|---|
| 12/6/23 | AbbVie | Cerevel Therapeutics | Neurology | Clinical | $8.7 billion | $45.00 | 22% |
| 11/30/23 | AbbVie | ImmunoGen | Oncology | Commercial | $10.1 billion | $31.26 | 95% |
| 10/3/23 | Eli Lilly | Point Biopharma | Oncology | Clinical | $1.4 billion | $12.50 | 87% |
| 7/28/23 | Biogen | Reata Pharmaceuticals | Neurology | Commercial | $7.3 billion | $172.50 |
59% |
Data source: Company press releases.
These are the four most recent $1 billion-plus biopharma deals that involved big premiums for publicly traded companies.
Here are some things they have in common.
Attraction 1: New neuroscience treatments
AbbVie's neuroscience division is becoming a major contributor to total sales following the approval of Vraylar by the U.S. Food and Drug Administration (FDA) for the treatment of major depressive disorder late last year. The pending acquisition of Cerevel Therapeutics gives it something it didn't have, a promising mid-clinical-stage candidate for the treatment of schizophrenia called emraclidine.
Today's treatments for schizophrenia are blockbuster drugs but they generally come with debilitating side effects that neurologists would like to avoid. Emraclidine is a next-generation modulator of muscarinic M4 receptors that could be a more tolerable solution for millions of schizophrenia patients.
Cerevel's lead candidate is still in a pair of phase 2 trials that were designed to support a new drug application, but commercial-stage drugmakers are attracting big buyout offers too. In July, Biogen agreed to pay $7.3 billion for Reata Pharmaceuticals and its recently approved treatment for Friedreich's ataxia called Skyclarys.
Friedreich's ataxia is a rare progressive disorder that affects roughly 5,000 Americans and Skyclarys is the first drug approved to treat the condition's root cause. This contrasts with Cerevel, which is developing a drug for millions of patients with schizophrenia. The biggest takeaway here for everyday investors is that big pharma companies appear hungry for new neuroscience drugs regardless of their FDA approval status or the size of their addressable patient populations.
Image source: Getty Images.
Attraction 2: New cancer therapies
If you're holding shares of an oncology-focused biotech, the odds of receiving a lucrative buyout offer are already better than average. Big pharma companies have buckets of cash to spend on new cancer drugs. In addition to recent offers from AbbVie and Eli Lilly, Pfizer offered Seagen, a cancer drug specialist, $43 billion in March.
In October, Eli Lilly became one of several big pharma companies to acquire a company developing radiopharmaceuticals. These are drugs that pair a radioactive isotope with a targeting protein that delivers radiation directly to tumor cells.
AbbVie's offer for ImmunoGen and Pfizer's offer for Seagen were inspired by antibody-drug conjugates (ADCs). These are proteins that deliver lethal chemotherapy payloads directly to tumor cells if they display specific antigens on their surface.
Biotechs are developing radiopharmaceuticals and ADCs are attracting buyout offers left and right. Plus, it doesn't seem to matter whether they're still in clinical-stage development or not. If you're holding shares of a company that's developing similar drugs, waiting around for a juicy buyout offer is probably the right decision.
