Big pharmaceutical and biotech companies seeking to grow company sales and revenues have two solid avenues. One is a consistent and growing pipeline full with good potential drugs in clinical trials. The other way is to buy growth and products using company stock, cash or both to do deals. In a new report, Stifel sees biotech stocks that could be takeover candidates soon.
The Stifel analysts are focused in on these two very solid biotech stocks because they have catalysts of a near-term nature that could help make the stocks attractive as takeover targets now. They are Ariad Pharmaceuticals Inc. (NASDAQ: ARIA) and Esperion Therapeutics Inc. (NASDAQ: ESPR). Both are rated Buy at Stifel.
This company is an integrated global oncology company focused on transforming the lives of cancer patients with breakthrough medicines. Ariad is working on new medicines to advance the treatment of various forms of chronic and acute leukemia, lung cancer and other difficult-to-treat cancers. The company utilizes computational and structural approaches to design small-molecule drugs that overcome resistance to existing cancer medicines.
The Stifel analysts list some specific reasons that they feel clear the runway for a deal to get done.
- CEO Harvey Berger is retiring as part of a deal that allows the company to settle its proxy battle with the largest shareholder Sarissa Capital Management. With this now accomplished, and the stock acting well in response, the Stifel team feels that a potential sale of the company is the preferred path and plan of action from existing shareholders.
- Growing sales of the company’s leukemia treatment drug Iclusig, which were temporarily suspended in the United States due to safety concerns at one point, could be a huge factor for an acquiring company. In fact, the analysts believe that down the road sales could be as high as $400 million.
- The company’s ALK inhibitor brigatinib may have a difficult time standing out in a crowded field, but the Stifel team feels like the drug may be very appealing in the treatment of brain metastases.
- With a board of directors shifting towards activism, and probably being urged by big shareholders, a deal seems to be something that is totally on the table now.
The current Stifel price target for the stock is $10. The Thomson/First Call consensus price target is lower at $8.69. Note that shares closed Wednesday at $9.23.
This company is an emerging pharmaceutical biotech focused on developing and commercializing first-in-class, oral, LDL-cholesterol lowering therapies for the treatment of patients with hypercholesterolemia and other cardiometabolic risk markers. ETC-1002, Esperion’s lead product candidate, is a unique, first-in-class, orally available, once-daily small molecule designed to lower LDL-cholesterol levels and avoid the side effects associated with therapies currently available for lowering LDL-cholesterol. ETC-1002 is being developed for patients with hypercholesterolemia, including those with a history of statin intolerance.
The Stifel team cited reasons for this stock as well that could be putting it in play as a solid takeover candidate in the not-too-distant future.
- In March the company reported very impressive topline results for the ETC-1002. In fact, the clinical findings showed that the drug in combination with statins, lowered LDL-C by up to 24%. This was accompanied by 30% reduction in hsCRP, a key marker of inflammation. The company also said it hoped to start enrolling patients in large Phase 3 trials later this year. Positive Phase 3 results could lead to an FDA approval. The bottom line? The Stifel team thinks the drug could ultimately be the best-in-class non statin LDL lowering agent. They also think physician feedback suggest an oral availability combined with a lower price point makes it a very attractive asset.
- The company itself has discussed the possibility of a global partner. Which may be made easier by the fact that he executive chairman, and chief scientific officer is Roger Newton, who is credited with being the co-discoverer of Lipitor, the highest selling drug in U.S. history
Stifel currently has a $106 price target, but the consensus target is much higher at $124.50. The stock closed most recently at $99.02.
It is important to remember that, even though the analysts feel these could be takeover targets soon, there is absolutely no guarantee that anything will happen. These stocks are only suitable for extremely aggressive accounts with a very high risk tolerance level.