4 Biotechs That Could Be Potential Acquisition Targets In 2021

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Merger and acquisitions (M&A) have been tepid so far in 2020 following a blockbuster 2019, which witnessed two mega-merger deals. There have been several small ticket acquisitions in 2020 including some billion-dollar offers. The COVID-19 pandemic resulted in a shift in focus to development of vaccine and treatments for the deadly disease, which has taken 1.65 million lives so far.

However, recently AstraZeneca announced the biggest deal of the year, offering to buy biotech major, Alexion Pharmaceuticals for almost $39 billion. Another pharma giant, Eli Lilly, followed in with a billion-dollar offer to buy gene therapy biotech, Prevail Therapeutics.

Both AstraZeneca and Lilly, and other pharma companies that announced M&A deals earlier this year are particularly looking to diversify their pipeline into newer avenues of drug discovery and development. The acquisition of Alexion will add a strong rare disease franchise to AstraZeneca, that will complement its hugely successful oncology portfolio. With the acquisition of Alexion, AstraZeneca is likely to gain 10 promising candidates which will likely be launched by 2023. Meanwhile, the acquisition of Prevail Therapeutics will add pre-clinical and clinical-stage gene therapy programs to Lilly’s pipeline, a new and attractive avenue.

Given that it takes several years and millions of dollars to develop new therapeutics from scratch, large pharmaceutical companies, sitting on huge piles of cash, prefer to buy innovative small/mid cap biotech companies to build out their pipelines. We expect other pharma companies to follow suit to boost their pipeline amid rising competition and dwindling sales of legacy drugs. The focus will primarily be on companies with either rare disease candidate or gene therapies in their pipeline.

Companies with pipeline candidates that target rare disease are likely to demand higher price due to lower competition. Meanwhile, gene therapies are in focus with several companies targeting to develop a one-time gene therapy-based treatment for diseases. This newer avenue of treatment also has potential to earn high revenues as very few companies have been successful in developing an effective gene therapy. Cost synergies in research and development (R&D) plus sales and marketing are also added benefits.

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