Summary:
BPIQ monitors M&A of smid-cap biopharmas
There has been an uptick in biopharma M&A since May 2022
Q2 2023 started off with a bang with GSK acquiring BLU for $2B and MRK acquiring RXDX for $10.8B
What are the key attributes of these M&A targets? And what are some other companies that fit these characteristics?
See our full BPIQ forum (Part 2) to learn about ALL the attributes today.
Also check out our forum that includes even more companies that fit these characteristics!
Get access to our more detailed quarterly biotech M&A report, including key M&A target attributes - CLICK HERE and sign up for a free account.
As we are almost halfway through the second quarter of 2023, we are on track to see the greatest activity per year for mergers and acquisitions in the last two years. While there were 38 acquisitions announced in 2022, there are already 24 announced as of May 4, 2023.
See Part 1 of our new M&A analysis for a list of activity by quarter since 2021 and a list of all M&As.
Key Target Attribute 1: A Late Stage (or Registrational Trial) or Approved Asset
It is especially noteworthy that in 2021, the number of acquired companies with a Phase 3 or registrational trial was >70% and in 2022 70% of acquired companies have a Phase 3 or later stage asset. This shows the importance of later stage and/or approved clinical assets for acquisition candidate companies. Clearly smid-caps that have a Phase 3, or registrational trial, or commercial asset are the key targets for M&A. Thus, investors looking to profit by holding stock in a company when it announces it is being acquired should focus on companies with stage 3 or later assets.
Multiple acquisition announcements last quarter were from companies with approved products including AVEO, HZNP, MYOV, and OYST. Two announcements in January were also for companies with recently approved products (ALBO product approved 2021 and AMYT product approved 2020). The confirmed future acquisition of SGEN by PFE further shows the importance of these late stage trials/approved products for acquisition targets. This once again shows the importance of companies with approved products as their lead assets.
See our Free BPIQ report (after signing up for free) for Table 2 that includes all companies that have been acquired since the beginning of 2022. The percentage of these companies with Phase 3 or later trials is >85%. Also see our full BPIQ Pro report for Table 3 that includes all approved smid-cap biopharma products since 2019. These companies thus have a key characteristic as possible future acquisition targets. And watch for our upcoming blog focusing on recent chatter around possible M&A candidates.
Key Target Attribute 2: Strong Patent Protection
It makes sense that good targets have a recently approved commercial asset, but this likely means that there is a lot of life left on patent protection of that asset. This is a second key attribute for an acquisition target. Investors who are not patent attorneys, can at least look at company statements and public articles on patent positions of these companies to at least have an idea of the strength of their patent position. Ideally, a company would have composition of matter patent protection going out at least 10 years, and no indication in the public domain of questions of the validity of such patents.
Of course, composition of matter protection for at least 10 more years, is an ideal situation, and good acquisition targets often don't have ideal patent positions. For example having method of use protection that is difficult for competitors to circumvent and that goes out for at least 5 years, could drive a big deal.
Key Target Attribute 3: Partner Takes a Stake in Target
To see more details about these key attributes as well as additional key attributes read our Free BPIQ forum here.
Companies that Fit this Model - See our New forum for a list of these possible targets and stock picks!
At BPIQ, possible M&A targets that we focus on include companies with:
Early commercial products with a lot of revenue
Late stage assets/commercial assets that can compete with big pharma assets (same MoA in the same indication)
Tickers that are held in many hedge funds
Licensing agreements
Table 1. M&A stock picks - Potential M&A targets that fit these key attributes!
Get access to our more detailed quarterly biopharm M&A report, including key M&A target attributes - CLICK HERE and sign up for a free account.
Concluding Remarks
In summary, the recent increase in biopharma M&A activity has helped to rejuvenate this sector. Biopharma companies with at least one approved clinical asset that was approved in the last 3 years, is a good starting point for identifying companies that are worthy of deeper analysis for possible addition to your portfolio. In our deepest versions of this article for paid subscribers, we not only provide a list of all the companies in our database with a commercial product approved in the last 3 years, we reveal several other characteristics of good M&A targets, and discuss whether current biopharma valuations are in a good range for M&A.
Sign up for a Pro subscription now and get instant access to even more in depth M&A analysis.
This article is NOT legal, investment or tax advice. Please do your own diligence before making any investment decisions.
Article history:
Originally posted 5/5/23
Last updated 5/31/23
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