The $8.8 Billion cash buyout of Millennium Pharmaceuticals, Inc. (NASDAQ: MLNM) has created a situation worth monitoring today. It isn’t just that this buyout could create a cascade of other biotech deals. The easier call is actually in just figuring out which emerging drug and biotech stocks will actually see new biotech investor inflows of cash from institutions that have to invest in these companies. More than 94% of MLNM was also listed as "held by institutions" according to data from Capital IQ.
Institutions have been selling the stock today from $24.30 to $24.50 rather than waiting for the $25.00 and this had traded more than 180 million shares late in the day (more than $4.3 Billion worth of stock). As the institutions take this money out, that theoretically ends up in other similar criteria companies. Of course this is only a very partial list, and we wouldn’t want to believe that those funds will only go into ‘identical criteria" emerging pharma and biotech stocks in the U.S. alone. But here is a partial list of stocks that have somewhat similar characteristics that could be some of the beneficiaries in this scenario:
Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) with a $2.5 Billion market cap is now in its second transitionary year where revenues went from partnership and interest revenues into product revenues as analysts expect more than $213 million in 2008 revenues and more than $360 million for 2009. Currently markets Soliris for blood disorders.
Cephalon, Inc. (NASDAQ: CEPH) has a $4.4 Billion market cap and established revenues of $1.77 Billion last year. Analysts expect revenues to be $1.88 Billion this year and more than $2.1 Billion next year. It already has drugs in place or in development for central nervous system disorders, pain, oncology, and addiction.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) may be a tad small with a $1.1 Billion market cap and with fresh contamination problems, but its name wasn’t left off. 2007 saw $294+ million in revenues, and analysts are looking for revenues of $391 million this year and $479 million next year. Company’s Cubicin is on market as the first antibiotic in a new class of anti-infectives called lipopeptides for strep, staph, and other infections.
Imclone Systems (NASDAQ: IMCL) would have matched with a $3.8 Billion market cap and Erbitux as a current cancer drug, although this has been between $30 and $45.00 per share since its huge drop in 2004 and activists haven’t been able to make it budge.
Onyx Pharmaceuticals Inc. (ONXX) has a $1.9 Billion market cap and it has also transitioned to a revenue generator with analysts expecting revenues of $80 million this year and $161 million next year. Nexavar is its kidney cancer and tumor drug, plus other partner studies in place.
Sepracor Inc. (NASDAQ: SEPR) has a $2.4 Billion market cap and is also in the revenue generation stage, although it has been a painful stock for many investors over the last 12 to 18 months. Revenues are already established and analysts expect revenues to be $1.35 Billion this year and $1.53 Billion next year. LUNESTA is major product, has key partners in place.
United Therapeutics Corp. (NASDAQ: UTHR) has a market cap of $1.9 Billion and generated almost $211 million in 2007 revenues. Analysts expect revenues to hit $261+ million this year and $346+ million next year. Drugs treat cardiovascular, cancer, and infectious diseases.
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Jon C. Ogg
April 10, 2008
Jon Ogg produces the Special Situation Investing Newsletter. He can be reached at firstname.lastname@example.org and he does not own securities in the companies he covers.