In today's head-to-head matchup, we've got two drugmakers that are ripe for a takeover target. Clinical Data
Let's take a look at some qualities that pharmaceutical giants look for in potential takeout targets to see which one is more appetizing.
Valuing multiple moving parts can be difficult, and the cleaner an acquisition is, the better.
By that metric, Amarin has the advantage since it's completely focused on its fish oil drug, AMR101, while Clinical Data has a bit deeper of a pipeline beyond its recently approved depression drug, Viibryd.
But the advantage is minimal. Most of the value of Clinical Data is tied up in Viibryd, which still makes it a prime target to be taken over. Management has even admitted so, although it's going ahead with the launch in case a suitor doesn't appear.
The market for AMR101 is fairly straightforward. GlaxoSmithKline's
The potential market for Viibryd is larger than AMR101. Multiple drugs -- Forest Labs'
Whether a pharmaceutical company thinks it can launch Viibryd and make it a multi-billion drug remains to be seen.
Ultimately, it all comes down to cost and how much risk a potential buyer is willing to shoulder and whether it's justified by the cost.
AMR101 looked good in its first phase 3 trial, but it still has one more phase 3 trial -- and a Food and Drug Administration review -- left to go. Viibryd is already approved, so there's essentially no clinical risk. Of the two, Amarin is clearly more risky in terms of a suitor knowing what they're getting.
The biggest risk for Clinical Data is getting Viibryd prescribed and paid for -- half of the battle these days. All that competition will make it tough, although some drugmaker might feel up to the task.
The two have remarkably similar valuations, coming in right around $875 million for market caps. The relative risk and market potential balance each other out, and both seem fairly valued to me.
I'm inclined to go with Amarin. At this point, a potential suitor might just wait until the results of its second phase 3 trial are released in the second quarter before buying. It'll be more expensive, but it reduces the risk for the suitor -- a welcomed commodity to the pharma industry these days. If no suitor comes along, Amarin is prepared to submit its marketing application this year.
My main reason for shunning Clinical Data is because I'm not convinced of the market potential of Viibryd. I'm willing to concede that some large pharma might come in a buy Clinical Data for a 50% premium, but you can't buy based on that alone. Savient Pharmaceuticals
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