Allergan's (AGN) - Get Report $639 million buyout of Vitae Pharmaceuticals (VTAE) arguably sets the bar for developers of psoriasis therapies and could bode well for peers of the latter such as New York biopharma company Kadmon Holdings (KDMN) - Get Report .
At least one follower of Kadmon, the biopharma company in which Dan Loeb's activist fund recently took a large interest, is predicting its chances of fielding attention from potential suitors may have increased in light pf one of Allergan CEO Brent Saunder's several recent moves on the deal front.
"Obviously Allergan saw an opportunity here with Vitae," Michael King of JMP Securities said. "It is a very large and under-addressed opportunity."
Dublin-headquartered Allergan said Sept. 14 it would spend $21 a share in cash, a roughly 159% premium, for the clinical stage biotech. Vitae's lead drug candidates are VTP-43742 and an oral RORyt inhibitor to treat patients with moderate-to-severe psoriasis, a common skin condition.
While Vitae is also developing a potential treatment for mild-to-moderate atopic dermatitis, King believes the key driver of the deal was the target's oral RORyt inhibitor, which in March completed a Phase 2a proof-of-concept clinical trial that demonstrated significant efficacy.
Importantly, the recent promising clinical developments seen by Vitae may very well have positive implications for the success of a comparable psoriasis drug candidate under development by Kadmon, according to King. Should Kadmon's KD025, having already completed a Phase 2a study in patients with psoriasis that demonstrates promising early signs of efficacy, prove successful in a second Phase 2 trial, King anticipates the company could garner third party interest.
Also important is the passive activist stake disclosed by Loeb's Third Point LLC in Kadmon in late July. The New York activist firm owns approximately 17.6% of the company's outstanding shares as of Tuesday, Bloomberg data shows.
While the billionaire hedge fund manager has not disclosed any plans for Kadmon to date, Loeb has mounted a number of campaigns aimed at companies including Yahoo! Inc. (YHOO) and Seven & i Holdings, the parent of the 7-Eleven convenience store chain.
It was only in July that Kadmon, led by CEO and president Harlan W. Waksal, debuted on the public markets.
The company gained widespread interest upon its formation in 2010, as its founder is Harlan's brother, Sam Waskal, the former ImClone Systems CEO who spent five years in prison for an insider trading scandal involving Martha Stewart. Kadmon was Sam Waksal's first venture following his release from prison in 2009.
While its hard to pin down any one logical suitor for Kadmon, King said any number of Big Pharma players or large biotechs interested in immuno-oncology, oncolcolgy or biologics could take a look at Kadmon.
Likely not included in the potential buyer pool is Celgene (CELG) - Get Report given it already has its own psoriasis treatment, Otezla, he noted. Otezla generated $196 million in sales during Celgene's first quarter and the company expects the drug to generate north of $1 billion for the full-year 2016.
In terms of a potential takeout price, the analyst said Kadmon ought to be valued at about $16 a share, his current price target on the company. At $16 a piece, Kadmon would fetch almost $720 million in a sale scenario based upon its 44.9 million shares outstanding.
Besides KD025, Kadmon's portfolio includes products in-development in the areas of brain and leptomeningeal metastases as well as a treatment for Wilson's disease.
Officials with Kadmon and Third Point did not return requests for comment.
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