Usually when you think of a biotech takeover, it is a large cap biotech or pharmaceutical company that dives in and buys a small market cap stock with solid clinical data and a hot new and potentially profitable drug. In a new research report from Cowen, the firm’s well-respected analyst Ken Cacciatore makes a very good case that some huge, high-profile companies could actually be targeted.

Many investors may wonder who could possibly afford a huge deal priced anywhere from $20 billion to as much as $70 billion or more? The Cowen analyst makes the case that Allergan PLC (NYSE: AGN) could be the company. And why not? It just completed a huge sale of its generic business to Teva for a massive $40.5 billion. So between a huge cash stockpile, a big stock price and debt still cheap by historical standards, Allergan could pull off a deal.

Here are the three companies Cacciatore uses in his hypothetical. It is very important to note that this is an exercise, and there is absolutely no guarantee that any of these companies will actually be bought by Allergan or anybody else.

Biogen

This is the company that could really make waves if it were approached in a takeover situation. Biogen Inc. (NASDAQ: BIIB) got absolutely hammered recently when the company reported second-quarter earnings that were far below Wall Street estimates. The stock dropped 22%, mainly because the biotech giant substantially reduced full-year 2015 outlook. Biogen’s blockbuster drug Tecfidera registered much-lower-than-expected revenue growth, resulting in a much lower full-year 2015 guidance.

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The Cowen team assumes a 33% takeover premium, or close to $425 per share. They figure that with Biogen’s multiple sclerosis franchise, which currently dominates the market, an Allergan combination with Biogen could add an estimated $12 billion in 2017 annual revenues. They also make the case that the deal could provide some strategic overlap with Allergan’s CNS franchise, a significant component of which targets neurologists with Botox, and includes some movement disorder products.

With a current market cap of over $75 billion and a 33% premium, you would be looking at a deal in the ballpark of a whopping $100 billion. That would be a blockbuster to say the least, but given Biogen’s products and incredible pipeline, it could make very good sense.

The Thomson/First Call consensus price target for the stock is $387.93. The stock closed on Monday at $324.38.
Alexion Pharmaceuticals

The rumors have flown for some time that the stock has been considered by some firms as a potential acquisition target, and in the spring it was the big buyer. Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) bought Synageva Biopharma for a whopping $8.4 billion in cash and stock. That move added products and pipeline to compliment Soliris, the company’s only marketed product. Soliris is prescribed for the treatment of patients with myasthenia gravis, a rare neurological disorder, which reportedly affects an estimated 13,600 people in the United States.

The Cowen team thinks it would take a giant 35% premium to get the deal done. The company beat earnings estimates when it reported last week, but the guidance going forward disappointed some and the stock traded off sharply. The Cowen team sees the possibility of as much as $4 billion in revenues for the company in 2017. That said, it also would not be cheap. They think that given the 35% premium, the total deal could cost as much as $60 billion. But again, with Allergan’s huge sale to Teva, it has the deep pockets.

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The consensus price target for Alexion is $225.61, well above Monday’s close at $195.73 per share.

Vertex Pharmaceuticals

This stock has long been considered a buyout candidate. Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) engages in discovering, developing, manufacturing and commercializing small molecule drugs for patients with serious diseases in specialty markets. The company focuses on developing and commercializing therapies for the treatment of cystic fibrosis and hepatitis C.

Wall Street as a whole has long been very positive on the stock, and some have indicated that the company could have as much as $10 in potential earnings-per-share power. The consensus also expect that Vertex should receive final FDA approval for its cystic fibrosis drug VX-809 which some think could generate billions in revenues.

Cowen believes a deal would make strategic sense when combined with Allergan’s cystic fibrosis franchise. They anticipate a 37% premium would be needed to purchase the company. That would make the entire package approximately a $45 billion acquisition. That would be very workable given the trove of cash Allergan is coming into.

The consensus price objective for the stock is $140.65. The shares closed trading on Monday at $136.99.

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Again, this is a hypothetical exercise, period. However, this makes sense because sitting on a big pile of cash will not grow revenues for Allergan like an immediately accretive purchase. With so much cash, the debt portion of any deal does not have to be a killer, and also companies end up buying outstanding pipelines.

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