July 6, 2017
By Alex Keown, BioSpace.com Breaking News Staff
LOS ANGELES – Investors are constantly looking for a company that will provide a solid return and three mid-cap biotech stocks could be attractive morsels, according to one analyst.
Writing in The Motley Fool, analyst Sean Williams picked out three mid-cap biotech stocks that could see a spike in share prices due to potential M&A activity. Williams speculated that these three companies, Exelixis, Inc. , Portola Pharmaceuticals and Intercept Pharmaceuticals could be takeover targets for big pharma. If those companies are snapped up, investors would see a nice increase in share value, Williams said.
Shares of South San Francisco-based Exelixis are down more than 1 percent this morning, trading at $24.67 as of 9:47 a.m. What makes the company so enticing for big pharma buyers is its kidney cancer drug Cabometyx, which won approval in the U.S. and EU last year as a second-line treatment for renal cell carcinoma (RCC). That approval helped drive shares of Exelixis up 164 percent in 2016, particularly as some analysts, including Williams, have suggested that Cabometyx could chip away at Bristol-Myers Squibb ’s Opdivo share of the RCC market. The company continues to test the drug for various other cancers, including determining if it can be used as a first-line defense in RCC “advanced hepatocellular carcinoma where a statistically significant improvement in median overall survival is the primary endpoint,” Williams said. If Exelixis is in M&A play, Williams speculated the company could fetch as much as $10 billion from the right bidder.
Another South San Francisco-based company, Portola Pharmaceuticals has seen steady growth in its share prices over the past year. This morning the stock is trading at $56.46 per share. Less than one month ago the stock was trading at $35.06 per share. In June the U.S. Food and Drug Administration (FDA) approved Bevyxxa. Portola’s drug is the only anticoagulant approved for hospital and extended duration prophylaxis of 35 to 42 days of venous thromboembolism (VTE) in adult patients who have been hospitalized for an acute medical illness. Williams suggested the drug has a strong potential for use as an at-home therapy for deep vein thrombosis. The drug is expected to launch by the end of this summer and Williams said it could yield about $1 billion in annual revenue if it is marketed correctly. If it enters the at-home market, Bevyxxa could generate even more revenue for Portola, Williams noted. If that happens, Williams said the company would become a likely target for acquisition and suspected the share price could increase by about 50 percent.
New York-based Intercept Pharmaceuticals has been rumored to be a target of acquisition for some time. Companies like Gilead Sciences and Novartis AG have been rumored to be sniffing around Intercept due to the approval of its primary biliary cholangitis treatment Ocaliva. While the approval of Ocaliva is noteworthy, Williams said annual sales of the drug are expected to be in the neighborhood of $290 million. What might make the money flow for the company, and increase possible M&A interest, is if the drug is approved for the hot nonalcoholic steatohepatitis (NASH) market. Mid-stage trials of Ocaliva have shown the drug to be promising when it comes to NASH. Data analysis of a Phase IIb trial indicated Ocaliva showed a two point or more reduction in NAFLD scores in 46 percent of patients treated with the therapy. It also showed strong promise in reducing fibrosis in the liver, the company said in its June announcement. If those numbers continue, Williams said Ocaliva could become a “multibillion-dollar opportunity.” If Ocaliva’s NASH future pans out, Williams speculated Intercept could be valued at a 100 percent premium over its current $3.1 billion value.
