These 5 Biotech Stocks Could Be Big Takeover Targets in 2017

By Lee Jackson Updated Jan 12, 4:06PM EST · Published Jan 6, 8:35AM EST

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These 5 Biotech Stocks Could Be Big Takeover Targets in 2017 — © Thinkstock

After a very tough year for the biotech stocks last year, they initially jumped after the election of Donald Trump as investors hoped that the rhetoric on drug pricing would taper off. The gains quickly dissipated as Trump also said drug pricing and health care costs as a whole were too high and need to come down. So the question for investors that like the space is where to look for alpha this year.

One good area to keep an eye on is the small and mid-cap companies, as many of the large biotechs may be looking to make acquisitions to add growth that complements internal organic growth. A new Jefferies research report makes the case that five top companies may be right in the cross-hairs of the large cap biotech giants, or perhaps large pharmaceutical companies as well.

Bluebird Bio

This company has been in the takeover rumor mill for some time. Bluebird Bio Inc. (NASDAQ: BLUE) is a development stage biotechnology company focused on the development of gene therapies for the treatment of severe and rare diseases. The company 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.

The Wall Street consensus price target for the stock is $84.43. The shares closed Thursday at $67.50, in a 52-week trading range of $35.37 to $79.70.

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Incyte

This is another top mid-cap 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 consensus price objective is $109.57, and the stock closed yesterday at $104.81. The 52-week range is $55 to $109.95.

Medicines Company

This stock has been on a total roller-coaster ride over the past year. Medicines Co. (NASDAQ: MDCO) is a biopharmaceutical company with a focus on critical care patients in the hospital setting. It markets products for cardiovascular, infectious disease and surgical care. The clinical development pipeline has high potential and includes PCSK9 RNAi therapy, ABP-700 for anesthesia and Carbavance for bacterial infections.

The stock closed trading yesterday at $35.52, in a 52-week trading range of $27.50 to $41.79.

Kite Pharma

This stock has done outstanding since its hot 2014 initial public offering. Kite Pharma Inc. (NASDAQ: KITE) is a clinical-stage biopharmaceutical company that focuses on the development and commercialization of novel cancer immunotherapy products. It is developing a pipeline of engineered autologous cell therapy-based product candidates for the treatment of solid and hematological malignancies. Its lead product candidate is KTE-C19, a chimeric antigen receptors-based therapy that is in Phase 2 clinical trials for the treatment of patients with refractory diffuse large B cell lymphoma, including primary mediastinal B cell lymphoma and transformed follicular lymphoma.

The consensus price target is $75. Shares closed way below that level on Thursday at $49.68. The 52-week range is $38.41 to $64.30.

Neurocrine Biosciences

This company is partnering with a top big pharmaceutical company, and the data has been very solid. Neurocrine Biosciences Inc. (NASDAQ: NBIX) discovers and develops innovative and life-changing pharmaceuticals, in diseases with high unmet medical needs, through its novel research and development platform, focused on neurological and endocrine based diseases and disorders.

The company’s two lead late-stage clinical programs are elagolix, a gonadotropin-releasing hormone antagonist for women’s health that is partnered with AbbVie, and valbenazine, a vesicular monoamine transporter 2 (VMAT2) inhibitor for the treatment of movement disorders. Neurocrine intends to maintain certain commercial rights to its VMAT2 inhibitor for an evolution into a fully integrated pharmaceutical company.

The consensus price objective is $68.27. The stock ended Thursday at $41.38, in a 52-week range of $32.25 to $55.15.

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Clearly there is no guarantee any of these companies are acquired. The good thing for aggressive growth investors is that even if they are not taken over, these stocks remain solid biotech investments with great product lines and clear upside potential.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.