Just as the biotech segment was starting to regain lost ground, and was fast approaching 2016 highs, yet another speed bump was hit. The EpiPen controversy, and the resulting commentary again from presidential candidate Hillary Clinton on drug pricing, as well as a petition by Congress, quickly put the brakes on the advance. Despite stalling, a major acquisition was finally completed, and now all eyes are on who could be next.

In a new research report, Baird notes that with Pfizer Inc. (NYSE: PFE) finally outbidding a host of other companies for Medivation Inc. (NASDAQ: MDVN), eyes on Wall Street are focused on who could be the next target. They note that two of the companies in the firm’s research coverage universe may be considered speculative takeover targets, and a third is a possible target as well.

It is important to note that these companies have been mentioned in the past by other firms as possible takeover candidates, and it is possible that none of them receive a bid.

BioMarin Pharmaceuticals

This is a Wall Street favorite, and first- and second-quarter earnings were outstanding. Analysts remain very positive on the rest of 2016. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio comprises five approved products and multiple clinical and preclinical product candidates.

Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there. The company is expected to post around $1.09 billion in revenue this year and possibly around $1.32 billion next year following the approval of Vimizim, an enzyme replacement therapy for Morquio syndrome, which posted big results in the quarter.

Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is focused on oncology drugs and invests heavily in early-stage molecules. Although the company is growing consistently, there is a major biosimilars threat to its three big drugs — Rituxan/MabThera, Herceptin and Avastin. These three drugs accounted for 42% of Roche’s total revenue during the first half of 2016. So an acquisition makes sense should the biosimilars eat into current profits.

The Baird price target for the stock is $115, and the Wall Street consensus target price is at $119.29. The shares closed Tuesday at $94.95 apiece.

Incyte

This company often is rumored to be in the sights of a larger biotech company. Incyte Corp. (NASDAQ: INCY) has a current validated approach in hematology-oncology, and there’s reason to believe the three wholly owned clinical-stage assets the company has could drive several billion in revenue, something important for an acquiring company looking to acquire assets. Many on Wall Street are bullish on the company’s rich pipeline of small molecule therapies in all stages of development, and they see the company as a key player in the cancer space.

Incyte focuses on the discovery, development and commercialization of proprietary therapeutics in oncology. It offers Jakafi for the treatment of myelofibrosis and polycythemia vera cancers. Its clinical stage products include ruxolitinib cream, which is in Phase 2 clinical trial for the treatment of alopecia areata; and INCB52793, which is in Phase 1/2 for the treatment of advanced malignancies. The company’s clinical stage products also comprise baricitinib, which is in Phase 3 trial for rheumatoid arthritis, as well as a completed Phase 2 trial for psoriasis and diabetic nephropathy.

The company announced earlier this summer new 28-week data from a Phase 3 study (RESPONSE-2) on Jakafi for the treatment polycythemia vera (PV). The multi-center, open-label, randomized study evaluated the safety and efficacy of Jakafi, in comparison to the best available therapy, in patients with PV who are resistant to or intolerant of hydroxyurea, dependent on phlebotomy for hematocrit control and do not have an enlarged spleen.

The Baird analysts don’t cover the company but think it’s a possible target. The Wall Street consensus price target for the stock is $98.71, and the stock closed most recently at $80.98.

Tesaro

This is another biotech the Baird team likes that could be in the sights of another company. Tesaro Inc. (NASDAQ: TSRO) is an oncology-focused biopharmaceutical company that identifies, acquires, develops and commercializes cancer therapeutics and oncology supportive care products in the United States and internationally.

Its product portfolio consists of Rolapitant, a neurokinin-1 receptor antagonist, which is in Phase 1 intravenous clinical trials for the prevention of chemotherapy induced nausea and vomiting; Niraparib, an orally active and potent poly polymerase inhibitor to treat ovarian or breast cancers; and TSR-011, an anaplastic lymphoma kinase inhibitor, which is in phase 1/2a dose escalation clinical trial in cancer patients. The company also offers Keytruda and Opdivo, an anti-PD-1 antibody products, for the treatment of certain non-small cell lung cancers.

In a huge clinical victory, the company announced in late June that the Phase 3 NOVA trial of niraparib successfully achieved its primary endpoint of progression-free survival (PFS). This trial demonstrated that niraparib significantly prolonged PFS compared to control among patients who are germline BRCA mutation carriers, among patients who are not germline BRCA mutation carriers but who have homologous recombination deficient tumors as determined by the Myriad myChoice HRD test, and overall in patients who are not germline BRCA mutation carriers.

Baird has a price target of $105, and the consensus target is at $104.23, The shares closed most recently at $86.09.

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Needless to say, these are only suitable for very aggressive accounts. If a binary event goes the wrong way for a company the downside can be big. The odds are somewhat tilted in the three companies’ favor, but caution should be observed. The clinical success they have achieved could be key for a larger company to gobble one of them up.

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