Pharma Merger/Buyout Hunt Continues in Biotech, Valuations Under Focus

Health and Healthcare

Published: March 1, 2013 3:06 pm

Last Updated: March 26, 2020 7:27 pm

The hunt by Big Pharma stocks for smaller drug companies and biotech stocks continues. A report citing “sources” from Dow Jones News has signaled that Bristol-Myers Squibb (NYSE: BMY) has considered large acquisitions. Biogen Idec Inc. (NASDAQ: BIIB) and Shire plc (NASDAQ: SHPG) were two companies named in the notes today, but then came note that the company is still looking at acquisition possibilities.

Acquiring the multiple sclerosis franchise via Biogen Idec Inc. (NASDAQ: BIIB) would not be an easy task. The shares have rallied handily over the last three years with shares rising about 200%. Its market value is currently $39.9 billion as well. Bristol-Myers Squibb has a market value of almost $61 billion, so whether Biogen Idec could be bought or not would depend handily upon how much of a premium it would have to pay.

Shire plc (NASDAQ: SHPG) would be a much easier acquisition with a market value of close to $17.5 billion. We would caution that Shire is an Ireland-based outfit rather than being U.S.-based.

After looking at the valuation, Bristol-Myers trades at about 20-times expected 2013 earnings and about 17-times expected 2014 earnings. Biogen Idec trades at more than 21-times 2013 expected earnings and almost 17.5-times expected 2014 earnings. Shire trades at only about 14-times expected 2013 earnings and about 12.6-times expected 2014 earnings.

As a reminder, playing the biotech sector simply by ETFs is no easy task as the ETFs that track the sector all have serious caveats that investors need to consider. Not all biotech companies are created equally, and the reality is that all of the ETFs in the sector are very different as well.

A with any report that only cites “sources,” we would advise our readers to consider these simply as hearsay or rumors.

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