Gene Therapy M&A Appetite Provides Lift After Audentes Deal
Gene Therapy M&A Appetite Provides Lift After Audentes Deal
(Bloomberg) -- Biotech’s second year of red-hot takeovers is set for a strong finish as Astellas Pharma Inc.’s move to buy Audentes Therapeutics Inc. for about $3 billion comes a week after Novartis AG’s $6.8 billion deal for Medicines Co.
The deals continue a trend of mega mergers that was triggered in January with Bristol-Myers Squibb Co.’s $74 billion purchase of Celgene Corp. in the biggest ever biotech deal. The sector’s more than $130 billion in M&A so far this year is on track to meet or maybe surpass the previous year’s record, according data compiled by Bloomberg.
“We clearly underestimated big pharma’s appetite for gene therapy,” wrote Citi analyst Mohit Bansal in a research note to clients. Given recent deals there appears “to be a demand for late-stage gene therapy companies, and big pharma is willing to pay high premium for such companies.”
With the optimism, the Nasdaq Biotech Index rose 0.5% on Tuesday as the broader market churned. An equal-weighted ETF tracked by specialists, the SPDR S&P Biotech ETF (XBI), gained 1.3%.
As investors hunt for the next takeout darling, several analysts across Wall Street have pitched companies with attractive technologies and manufacturing capabilities.
UniQure NV, an Amsterdam-based gene therapy company, topped the list of recommendations with shares jumping more than 16%. In June, Bloomberg News had reported the drugmaker was said to be exploring its options, including a potential sale.
“As a knee-jerk reaction, we would expect to see gene therapy companies trade up in sympathy tomorrow,” wrote SVB Leerink’s Joseph Schwartz.
Schwartz highlighted UniQure as well as companies Solid Biosciences Inc., Sarepta Therapeutics Inc., and BioMarin Pharmaceutical Inc. as likely beneficiaries.
Astellas’ lack of a gene therapy footprint should allow an easy approval from global regulators, according to analysts. That stands in contrast to Roche Holding AG’s delayed $4.8 billion deal to buy small-cap drug developer Spark THerapeutics Inc., which spooked some on Wall Street.
However, SVB Leerink anlayst Mani Foroohar wrote that Monday’s deal announcement “could signal a return to gene therapy M&A” and return some “acquisition optionality” to stocks within his coverage.
Here’s a look at what some on Wall Street are saying about the deals and which peers may benefit:
Citi, Mohit Bansal
“We think a company like BMRN in our coverage could fit the bill. BRMN has a filing-ready hemophilia A product.”
“Overall, we expect gene therapy stocks to trade up on this deal.”
SVB Leerink, Joseph Schwartz and Mani Foroohar
“We remain positive on gene therapy companies -- particularly those with internal manufacturing capabilities -- and subsequent M&A activity in the gene therapy space would not be surprising to us.”
“In particular, we expect QURE, SLDB, and SRPT to trade higher given the significant weight of gene therapy assets in these companies; the magnitude of upside moves for BMRN, FOLD, and RARE, may be less given the more diverse product/candidate mix in each of these respective companies.”
“While gene therapy companies in our universe have differences vs BOLD in technology platforms (AVRO, BLUE and RCKT), business models (BBIO, RGNX) and target indication strategy (AXGT), we expect shares to react positively to this news across our gene therapy and gene editing (NTLA) coverage.”
Piper, Christopher Raymond
“We suspect – and for good reason – that gene therapy levered or gene therapy-focused stocks are likely to see a decent rally today and going forward. Among the Piper coverage universe, these names include ADVM, BBIO, BMRN, MGTX, RCKT, QURE, RARE and SRPT.”
Raymond James, Steven Seedhouse
“This is clearly just another bullish signal for genetic medicine.”
“It may also signal ‘platform value’ is a real thing that shouldn’t be ignored in today’s market. In our coverage, we expect EDIT (Outperform), NTLA (Outperform), CRSP (Underperform) will benefit from the optics.”
Wedbush, David Nierengarten
“We admit to being surprised at the acquirer, but any buyer of Audentes was likely to be one interested in buying not only leading gene therapy candidates but also technical expertise and manufacturing capacity.”
“Early this year acquisitions for gene therapy companies Nightstar and Spark Therapeutics by Biogen and Roche, respectively, increased M&A chatter in the sector, and with this latest buyout, we expect the sector to benefit.”
To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm, Jennifer Bissell-Linsk
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