The biotechnology industry is getting more attention than usual following a buyout offer for Alpine Immune Sciences (ALPN +0.00%) from Vertex Pharmaceuticals (VRTX +1.27%).
Vertex recently offered Alpine Immune Sciences $65 per share, or about $4.9 billion in cash. On April 9, the day before the announcement, Alpine's stock price closed at about $39 per share.
NASDAQ: ALPN
Key Data Points
Government regulators rarely try to prevent big pharmaceutical companies from acquiring clinical-stage biotechs. This means Alpine shareholders will most likely see their investment increase by about 67% when the deal closes, probably in a couple of months.
Licensing deals and complete buyouts are run-of-the-mill for precommercial-stage biotech stocks. That's because new drug launches tend to disappoint when they're run by inexperienced sales forces. Also, established pharmaceutical companies have to constantly find new revenue sources, to replace those they lose to generic competition.
Vera Therapeutics (VERA +0.14%) is a clinical-stage biotech developing a candidate similar to the one that led Vertex to offer Alpine a 67% premium. Let's have a quick look at Vertex and Alpine, to see if Vera Therapeutics could be next to receive a juicy buyout offer.
NASDAQ: VERA
Key Data Points
Why Vertex wants Alpine
Around 37 million U.S. adults have chronic kidney disease, according to the Centers for Disease Control. Diabetes and high blood pressure are the main causes, but around one in 10 kidney biopsies reveal a condition called immunoglobulin A nephropathy (IgAN).
IgAN is a leading cause of kidney failure, but it lacks effective treatment options that address its root cause. Vertex is buying Alpine because it thinks its lead candidate, povetacicept, could become a blockbuster drug (producing more than $1 billion in annual sales) as a treatment for IgAN.
Povetacicept is a dual-action antagonist that acts on proteins called BAFF and APRIL, which play a key role in IgAN and other autoimmune diseases.
Several years from now, a successful launch for povetacicept as a treatment for IgAN could make the $4.9 billion Vertex offered Alpine seem like a bargain. Factor in potential expansions to treat related diseases such as lupus, and it's no wonder Vertex made an uncharacteristically big decision to buy Alpine outright.
The next biotech buyout?
Alpine isn't the only biotech start-up developing an experimental kidney-disease therapy focused on APRIL and BAFF. Analysts on Wall Street were a little surprised that Vertex didn't choose Vera Therapeutics.
In January, Vera showed 72-week data from Origin, a study meant to enroll 376 IgAN patients. In the phase 2b portion of the pivotal study, patients treated with atacicept showed consistent and sustained reductions in signs of kidney damage. Most of the patients who were randomized to receive a placebo at the trial's outset chose to receive atacicept at the 36-week mark, and this crossover group showed similar benefits.
Vera is months ahead of Alpine on the development timeline, having already started enrolling patients for the phase 3 portion of the Origin study; it expects to complete enrollment in the second half. Meanwhile, Vertex and Alpine expect to begin a phase 3 trial with povetacicept in the second half of the year.
Is Vera Therapeutics a good stock to buy now?
Vertex thinks povetacicept is better at blocking BAFF and APRIL than atacicept or any other similar candidates. Even if Vertex is right about povetacicept, there's probably room for atacicept too.
Whether or not Vera is the next biotech buyout, its $2.3 billion market cap at recent prices seems like a fair valuation. The Origin study will more than likely produce phase 3 results by the end of 2025. A continuation of the trend we've already seen in phase 2b could drive the stock through the roof. That's assuming a big pharma company doesn't come along and make Vera a juicy buyout offer first.
There's still a lot that can go wrong for Vera Therapeutics, so nobody should make it a cornerstone of their portfolio. If you have a high tolerance for risk, though, a small bet isn't a bad idea.
