One good way for a company to increase sales and move past simple organic growth is to make an acquisition, and that is just what AbbVie Inc. (NYSE: ABBV) did this week with a gigantic $21 billion purchase of oncology drug company Pharmacyclics Inc. (NASDAQ: PCYC). The company’s major blood cancer drug Imbruvica could have sales that top $1 billion this year and $5.8 billion by 2020. The deal involved 58% cash and 42% AbbVie stock.
In a scene that plays out after each major acquisition, everybody on Wall Street attempts to quickly ascertain which company will be the next to be bought. In a research note from SunTrust Robinson Humphrey, analyst Salveen Richter has maintained that mergers and acquisitions will be a huge driving force to a continued run in the biotech industry, and the AbbVie take out only reaffirms this solid thesis. Many on Wall Street have maintained that large pharmaceutical companies and the big biotech players will go this route to strengthen current pipelines and fill product gaps.
Here are the three stocks that the SunTrust analyst feels could also be takeout candidates.
BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio includes five approved products and multiple clinical and preclinical product candidates. However, many Wall Street analysts have concerns about management’s ability to control costs and allow the company to become sustainably profitable. The company is expected to post around $700 million in revenue this year and possibly around $810 million next year, following the approval of Vimizim, an enzyme replacement therapy for Morquio syndrome. The SunTrust analyst notes the company could have two big readouts this year.
The Thomson/First Call consensus price target for the stock is $118.95. BioMarin closed up big Thursday at $113.50 a share.
Bluebird Bio Inc. (NASDAQ: BLUE) recently received Breakthrough Therapy designation from the U.S. Food and Drug Administration for its LentiGlobin BB305 drug product for the treatment of transfusion-dependent patients with beta-thalassemia major. LentiGlobin seeks to treat beta-thalassemia major and severe sickle cell disease by inserting a functional human beta-globin gene into the patient’s own hematopoietic stem cells ex vivo and then returning those modified cells to the patient through an autologous stem cell transplantation. The SunTrust team points out the company has had solid data this year and is a key player in the gene therapy arena, which remains very hot.
The consensus price target is set at $124. Shares closed Thursday at $112.30, and that was up a staggering 12.1%.
Incyte Corp. (NASDAQ: INCY) is another top stock that could be in the sights of a larger company. In addition to its current validated approach in hematology-oncology, there is reason to believe the three wholly owned clinical-stage assets could drive several billions in revenue, something important for an acquiring company looking to acquire assets. The SunTrust team is bullish on the company’s rich pipeline of small molecule therapies in all stages of development, and it sees the company as a key player in the cancer space.
The consensus price target is posted at $91.08. The stock closed above that on Thursday at $91.97, up almost 5%, most likely on the Pharmacyclics news.
While there is absolutely no guarantee any of these three companies will be bought, they are all outstanding holdings individually for very aggressive growth accounts.