Last year was somewhat of a down year for M&A volume in the biotech industry. Given the challenges and uncertainty brought about by the COVID-19 pandemic, that is certainly understandable, given that a good deal of focus was shifted to developing vaccines, treatments and diagnostics for the coronavirus during the year.
The top ten deals in the industry totaled $97 billion in 2020, led by the $39-billion buyout of Alexion Pharmaceuticals (ALXN) - Get Alexion Pharmaceuticals, Inc. Report late in the year by AstraZeneca (AZN) - Get AstraZeneca PLC Report. By contrast, in 2019, the top ten deals were worth more than $200 billion.
2021 should be a better one for deal volume as normalcy hopefully starts to return across the globe. There is certainly enough money flowing throughout the global economic system to believe we will see a significant pick-up in acquisitions this year across the sector. In fact, Global M&A volume reached over $1.4 trillion overall in the first quarter of this year according to Dealogic. This is up over 110% from the same time period a year ago, and an all-time record.
As it was in 2019 and 2020, the oncology space should continue to a core focus for purchases. Immunology, rare disease and cardiovascular names should also on the list as probable targets. In this piece, I’ll discuss several companies I like as standalone entities, but also make logical buyout candidates.
1. TG Therapeutics
In early February, TG Therapeutic’s (TGTX) - Get TG Therapeutics Inc. Report lead drug umbralisib garnered FDA approval to treat resistant follicular lymphoma and marginal zone lymphoma. This mid-cap also completed the Biologic License Application (BLA) at the end of the first quarter for its combination ublituximab with umbralisib as a treatment for patients with chronic lymphocytic leukemia (CLL). Based on late-stage study results, I expect the FDA to approve this treatment, and the company is already in the process of ramping up manufacturing capacity in anticipation of this approval.
In addition, three weeks after the company filed that BLA, it disclosed very positive data for ublituximab from two late-stage trials in patients with relapsing multiple sclerosis, which triggered some analyst upgrades and is a nice kicker on top of its potential in oncology. The company looks poised for success on its own and has plenty of cash on the balance sheet to pursue commercialization. However, with a market cap of just less than $6 billion, I could easily see a larger player scooping up TG Therapeutics before that happens.
2. Clovis Oncology
Clovis (CLVS) - Get Clovis Oncology Inc. Report is a much smaller oncology name that I could see as an acquisition target in 2021. Like all the PARP inhibitors, a group of pharmacological agents that have multiple indications, including the treatment of heritable cancers, the rollout of Clovis's Rubraca franchise has been much slower than initially anticipated. However, product revenues did come in at nearly $165 million in 2020 and managed to show sales growth of 15% over FY2019 despite the impacts from the pandemic.
Clovis is working to expand the target population for Rubraca with top line data from a Phase 3 study to treat first-line maintenance ovarian cancer monotherapy out sometime in the second half of this year. Clovis has a market cap just north of $600 million and ended FY2020 with approximately $240 million in cash and marketable securities on its balance sheet. The firm would make a logical bite-size acquisition for anyone that wanted to expand their footprint in oncology.
3. Axsome Therapeutics
Moving outside the oncology space, Axsome Therapeutics (AXSM) - Get Axsome Therapeutics Inc. Report is poised for an inflection year which may or may not include a potential takeover attempt. This central nervous system or CNS-focused concern has a robust pipeline and numerous potential catalysts over the next year. Its lead product candidate is AXS-05, which is targeting numerous indications including major depressive disorder or MDD, treatment-resistant depression or TRAD and agitation associated with Alzheimer's disease. The FDA accepted the company’s New Drug Application (NDA) for AXS-05 for the treatment of MDD last week under priority review status, and approval is likely forthcoming at the end of August.
In addition, the company initiated a Phase 3 study for the treatment of Alzheimer’s disease agitation late last year. There are no current approved therapies for this indication. I also like the potential of AXS-12, which has been granted FDA Orphan Drug designation for the treatment of narcolepsy, as well as Breakthrough Therapy designation for the treatment of cataplexy in patients with narcolepsy. Axsome seems like a solid “sum of the parts” value with a market cap of just under $2.5 billion.
4. Albireo Therapeutics
Finally, we end with Albireo Therapeutics (ALBO) - Get Albireo Pharma Inc. Report, a recent addition to my portfolio. This Boston-based biopharmaceutical firm is focused on the development of treatments for disorders associated with irregularities in bile acid biology. The company’s lead clinical asset (odevixibat) is awaiting approval for one indication (progressive familial intrahepatic cholestasis, or PFIC) in the second half of this year, and is undergoing Phase 3 trials for two others.
The company has a cash runway into 2023 after a recent secondary offering. This projection does not include the potential ~$100 million windfall from an FDA-issued priority review voucher upon approval for PFIC. Albireo also believes odevixibat can be a billion-dollar-a-year drug by the back half of the decade. Value seems compelling with just over a $600 million market cap.
And those are four biotech/biopharma names I like, own and feel good about their prospects in 2021. If any get bought out over the next year, that will just be icing on the cake.
Bret Jensen is a regular contributor to Real Money Pro, TheStreet’s sister site for active traders. Click here to learn more and get great columns, commentary and trade ideas from Tim Collins, Mark Sebastian, Paul Price, Doug Kass and others.
At the time of publishing, Jensen was long Albireo, Axsome Therapeutics, Clovis Oncology and TG Therapeutics.