SAN FRANCISCO -- Some thoughts and observations from the morning session of the first day of the J.P. Morgan Healthcare conference.
Biotech news flow: Decent but not great. Certainly better than the discouraging absence of news at last year's JPM meeting. Investors love M&A activity and today we got Takeda buying Ariad Pharma (ARIA) for $5.2 billion, or $24 per share. Merrimack Pharmaceuticals (MACK) - Get Report also sold some assets, most notably the pancreatic cancer drug Onivyde, to France's Ipsen for $575 million plus the potential for additional back-end milestone payments.
About that Ariad deal... There is a long history of Japanese pharma buying smallish U.S.-based oncology companies at big premiums. RBC Capital analyst Michael Yee points out this morning that the uber-bull takeout case for Ariad was $20-25 per share, which assumes $500-750 million peak sales for Iclusig and brigatinib combined and a 7-10 times sales multiple. Yes, Takeda overpaid -- not the first time, not the last. Congratulations to Alex Denner of Sarissa Capital. He went activist on Ariad soon after the Iclusig safety blowup in 2013. He forced the resignation of CEO Harvey Berger, stabilized the company, brought in a new CEO and now found a buyer. That is textbook, effective shareholder activism.
Brad Loncar is right but will it lead to more biotech M&A or will asking prices, once again, get too high?
Celgene's (CELG) - Get Report presentation was fine. Alexion Pharma's (ALXN) - Get Report presentation was fine. Gilead Sciences' (GILD) - Get Report presentation was fine. Did investors learn anything they didn't know or expect already? No.
One funny moment from the Gilead breakout, when CEO John Milligan was speaking about new oncology hire Alessandro Riva.
File this away, just in case: During Biomarin's (BMRN) - Get Report presentation, CEO JJ Bienaime mentioned that most of the questions posed so far by regulators in the U.S. and Europe during the review of Brineura have focused on the company's use of historical control data in the marketing applications package. The efficacy and safety data for Brineura to treat a form of Batten's disease are quite strong, so approval is not likely in jeopardy, but you never know.
Newlink Genetics (NLNK) - Get Report shares are up almost 20% because of the expansion of the cancer immunotherapy collaboration between Merck and Incyte announced this morning. Merck is doubling down on Incyte's IDO inhibitor to combine with its checkpoint inhibitor Keytruda. Newlink is developing an IDO inhibitor in partnership with Roche.
Vertex Pharma (VRTX) - Get Report Chief Operating Officer Ian Smith had some interesting things to say about possible M&A to broaden the company' focus beyond cystic fibrosis.
Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.