3 Likely Biotech Buyout Candidates

A new research report from the analysts at Cowen sees a potential wave of deals, some of which could be of the blockbuster variety. Here are some of the stocks they view as possible targets.

Alkermes PLC (NASDAQ: ALKS) is a top name that many on Wall Street for years has thought to be an acquisition target. The company has a diversified portfolio of more than 20 commercial drug products and a substantial clinical pipeline of product candidates that address central nervous system disorders such as addiction, schizophrenia and depression.

Alkermes announced last week the completion of patient enrollment in a Phase 2 study of ALKS 3831, an investigational, novel, oral, broad-spectrum atypical antipsychotic medicine in development for the treatment of schizophrenia. ALKS 3831 is composed of samidorphan, a novel, potent mu-opioid antagonist, in combination with the established antipsychotic drug, olanzapine. This combined with the incredible pipeline and portfolio makes the stocks a very valuable asset. The Thomson/First Call price target for the stock is $50.92. Shares ended trading on Friday at $43.23.

ALSO READ: 5 Orphan Drug Biotech Stocks to Buy With Big Upside Potential

Jazz Pharmaceuticals PLC (NASDAQ: JAZZ) expects adjusted earnings for 2014 in the range of $8.00 to $8.25 per share. The consensus forecast is $10.09 for 2015. That in itself is a reason many see the stock as a takeover target. The company is a specialty biopharmaceutical company that identifies, develops and commercialize pharmaceutical products.

Currently Jazz is developing JZP-110, an investigational compound, which is in clinical development for the treatment of EDS in patients with narcolepsy; and JZP-386, a deuterium-modified analog of sodium oxybate products that is under pre-clinical research and development and is intended for the treatment of narcolepsy patients. The consensus price target is $181.89, and the stock closed trading on Friday at $160.53.

Salix Pharmaceuticals Ltd. (NASDAQ: SLXP) is a stock that the Cowen thinks Allergan will try to acquire soon, and they estimate a bid in the $185 per share range. The analysts also think it is a deal shareholders would get behind, instead of the Valeant proposal. The Cowen team also think a combined Allergan/Salix would be a company that could be targeted by Actavis.

Salix develops and markets prescription pharmaceutical products and medical devices for the prevention and treatment of gastrointestinal diseases. Salix’s strategy is to in-license late-stage or marketed proprietary therapeutic products, complete any required development and regulatory submission of these products, and commercialize them through the company’s 500-member specialty sales force. The consensus price target is $162.82. The stock closed Friday right below that level at $161.77.

ALSO READ: Credit Suisse Sees 75% Upside in Sarepta

One interesting part of the Cowen report was a speculation that if Valeant Pharmaceuticals International Inc. (NYSE: VRX) was able to complete a deal with Allergan (NYSE: AGN), which the Cowen team sees as unlikely, that they would turn their sights to a possible mega-deal. The companies that Cowen mentioned as possible targets could include bellwethers such as Amgen Inc. (NASDAQ: AMGN), Celgene Corp. (NASDAQ: CELG) and even pharmaceutical giant Bristol-Myers Squibb Co. (NYSE: BMY).

One thing is for sure, any of these deals will require some deep pockets, and probably a stock and cash component, to get the deal done. That being said, Cowen is sure the consolidation will continue.