Why These 4 Biotech Stocks Could Be the Next Buyout Targets

In a new research note from SunTrust Robinson Humphrey that discusses the merits of the Alexion deal, the analysts also mention four other stocks that they think could possibly get swept up in the M&A excitement. These happen to be companies that other top Wall Street firms also see as potential buyout candidates: BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN), Bluebird Bio Inc. (NASDAQ: BLUE), Incyte Corp. (NASDAQ: INCY) and Vertex Pharmaceuticals Inc. (NASDAQ: VRTX).

BioMarin Pharmaceuticals

We featured this company on Wednesday in a post on top biotech stocks to buy. BioMarin develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio consists of five approved products and multiple clinical and preclinical product candidates.

BioMarin recently completed the submission of the New Drug Application (NDA) for approval of drisapersen in the United States and will be filing for approval in Europe this summer. In addition, the company announced it will share clinical results from the Phase 2 study of BMN 111 for the treatment of patients with achondroplasia sometime this quarter and, later in the year, full results from the Phase 1/2 study with cerliponase alfa for CLN2 disorder, a late infantile form of Batten Disease.

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The SunTrust analysts have the stock rated at Buy with a $151 price target. The Thomson/First Call consensus price target is $129.32. The stock closed Wednesday at $119.70, up almost 5%.
Bluebird Bio

This company has built an integrated product platform with broad potential application to severe genetic diseases and T cell-based immunotherapy. Back in February, it received a Breakthrough Therapy designation from the U.S. Food and Drug Administration (FDA) for its LentiGlobin BB305 drug product for the treatment of transfusion-dependent patients with beta-thalassemia major. LentiGlobin seeks to treat beta-thalassemia major and severe sickle-cell disease by inserting a functional human beta-globin gene into the patient’s own hematopoietic stem cells ex vivo and then returning those modified cells to the patient through an autologous stem cell transplantation.

Gene therapy is a super-hot area now in biotech, and it makes sense that a larger company would look to add this pipeline and its potential blockbuster drugs. Gene therapy last year won $3.0 billion of financing, up 510% on 2013, according to the Alliance of Regenerative Medicine, and the pace has continued in 2015, with Bristol-Myers Squibb investing in Dutch gene therapy company UniQure this month.

SunTrust has the stock rated at Buy and a $115 price target, which surely will move higher soon. The consensus target is $149.50. Shares closed most recently at $139.62.

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Incyte

This is another top company that could be in the sights of a larger one. In addition to its current validated approach in hematology-oncology, there is reason to believe the three wholly owned clinical-stage assets could drive several billion in revenue, something important for an acquiring company looking to acquire assets. The SunTrust team is 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.

SunTrust has a Buy rating and a $120 price target. The consensus target is posted at $115.67. The stock closed Wednesday at $100.54 a share.

Vertex Pharmaceuticals

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

Wall Street as a whole is also 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 its VX809 for cystic fibrosis should receive FDA approval.

SunTrust does not cover this stock, but the consensus price target is set at $136.92. Vertex closed Wednesday at $122.93 per share.

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While there is no guarantee that any of the companies will be bought, all four of them have seen takeover chatter, for years in some cases. Only investors with very aggressive accounts should be buyers of these stocks, given the inherent volatility and risk.