Health and Healthcare

Why 4 Top Biotech Stocks May Be the Next Takeover Targets

Lee Jackson

Published: April 16, 2018 8:15 am

Last Updated: January 12, 2020 1:24 am

Last week, Novartis A.G. (NYSE: NVS) announced a huge $8.7 billion all-cash purchase of AveXis Inc.(NASDAQ: AVXS), and many on Wall Street think there is a good chance that mergers and acquisitions continue in the biotech space. Many of the large companies are flush with cash, and with interest rates still historically low, floating debt to fund purchases still makes sense as well.

A new Jefferies research report from makes the case that the huge purchase by Novartis is a continuing validation of the progress and the potential for gene and cell therapies. The analyst also feels that other companies in the small and mid-cap biotech space with mid- to late-stage gene therapy pipelines could be takeover targets.

Numerous companies that Jefferies covers are mentioned as potential targets. Here we focus on four of the larger best-known companies, all of which are rated Buy at Jefferies.

Abeona Therapeutics

This clinical-stage biopharmaceutical company may be lesser known to investors, but it boasts a strong portfolio. Abeona Therapeutics Inc. (NASDAQ: ABEO) develops novel gene therapies for life-threatening rare genetic diseases. Its lead programs include ABO-102 (AAV-SGSH), an adeno-associated virus based gene therapy for Sanfilippo syndrome type A, and EB-101 (gene-corrected skin grafts) for recessive dystrophic epidermolysis bullosa.

Abeona Therapeutics also has a plasma-based protein therapy pipeline, including alpha-1 protease inhibitor (SDF Alpha) for inherited chronic obstructive pulmonary disease (COPD), which is a lung disease characterized by chronic obstruction of lung airflow that interferes with normal breathing and is not fully reversible.

The Wall Street consensus price target for the shares is $29.72. The shares closed Friday at $19.75, in a 52-week trading range of $4.55 to $22.75.

BioMarin Pharmaceuticals

This is one of Wall Street’s favorites and it posted solid earnings last year. 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.  Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is heavily focused on oncology drugs and invests heavily in early-stage molecules.

BioMarin’s consensus price objective is $114.30. The stock closed trading on Friday at $83.59 a share. The 52-week range is $75.81 to $100.51.

Bluebird Bio

This development-stage biotechnology company has been in the takeover rumor mill for some time. Bluebird Bio Inc. (NASDAQ: BLUE) is focused on the development of gene therapies for the treatment of severe and rare diseases. It has two clinical stage candidates: LentiGlobin for the treatment of beta-thalassemia and sickle cell disease, and Lenti-D for the treatment of childhood cerebral adrenoleukodystrophy, which is a rare genetic brain disorder that is estimated to affect approximately one in 20,000 people worldwide.

Friday’s closing price of $173.05 compares with a consensus price target of $222.35. The 52-week trading range for the shares is $74.75 to $217.64.

Spark Therapeutics

Buyout rumors have swirled around this company for years as well. Spark Therapeutics Inc. (NASDAQ: ONCE) is a gene therapy biotech that focuses on treating orphan diseases. Its pipeline of product candidates targets multiple rare blinding conditions, hematologic disorders and neurodegenerative diseases.

The company’s pipeline includes a product candidate targeting choroideremia, which is in a Phase 1/2 clinical trial and a product candidate for hemophilia A, which is in a Phase 1/2 clinical trial. Its product investigational candidate, voretigene neparvovec, is intended to treat a genetic blinding condition or inherited retinal disease.

The posted consensus price objective is $70.05, but the shares closed above that on Friday at $77.04. The 52-week trading range is $41.06 to $91.75.

These four top companies could be very attractive to large cap biotechs looking to add gene and cell therapy drugs to their portfolios. While better suited for aggressive growth accounts with a high risk tolerance, they all make sense as potential takeover targets.