M&A Watch: Biotech Deals Keep Rolling, Who Is The Next Buyout Target? (TEVA, VRX, CEPH, CRA, ALXN, DNDN, CBST, HGSI, UTHR, CADX, AMAG, SGMO)

Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) has trumped Valeant Pharmaceuticals International, Inc. (NYSE: VRX) after it agreed to acquire Cephalon Inc. (NASDAQ: CEPH) in a $6.8 billion deal.  The merger will give the mostly-generic Teva a portfolio of candidates in biotech drugs targeting cancer, pain, inflammatory diseases and more.

Teva’s $81.50 offer per share in cash may seem like a low premium of only about 6% to the closing price on Friday, but this is about 12% higher than Cephalon’s earlier $73 per share offer.   More importantly, this is nearly a 40% premium to Cephalon’s pre-merger offers.  The boards of directors of Teva and Cephalon have each voted in favor of this merger.  What we are most curious about is simple… Which biotech and small pharmaceutical companies will be next to be acquired?

Celera Corporation (NASDAQ: CRA) is one we felt made sense for genomics, particularly when you consider that so much of Celera was raw cash.  At that time of the deal, we also updated several other genomic possible targets.

Cephalon was noted as a possible buyout target even back at the end of January, and we gave a list with explanations on each of the following and more:  Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN); Dendreon Corporation (NASDAQ: DNDN); Human Genome Sciences, Inc. (NASDAQ: HGSI); Cubist Pharmaceuticals Inc. (NASDAQ: CBST); United Therapeutics Corporation (NASDAQ: UTHR); Cadence Pharmaceuticals Inc. (NASDAQ: CADX); AMAG Pharmaceuticals, Inc. (NASDAQ: AMAG); and Sangamo Biosciences Inc. (NASDAQ: SGMO).  Details with explanations on that full list here.

Foreign buyers have an advantage of preying on US companies due to the incredibly weak U.S. Dollar and drug companies are looking to bolster sagging drug pipelines.  The deals will continue, but the real risk for biotech investors is that there will be very few quality companies with real earnings left to invest in.

Not all of these other companies will be acquired.  Some are too expensive though others offer a buyer a significant pipeline and emerging drug boost… for those willing to pay up.

JON C. OGG