What Lies Ahead in Biotech Mergers & Buyouts?

December 1, 2008 · Filed Under Cancer, dendreon 

We have been digging around and around for days and weeks in the biotech sector.  Our goal is to determine which merger candidates can occur and to gather an opinion of the M&A outlook for 2009.  This is not going to be easy because of the bear market and because financing is now elusive.

The Genentech (NYSE: DNA) buyout by Roche has long been under question.  First the speculation was that it would have to come at an increased buyout price above the $79 offer.  Now there are just questions about the merger in its entirety.  because of the Dollar strength, the cost for Roche is now much higher in local currency terms.

Mike Huckman of CNBC just today gave a report showing many mergers and noting that companies like Schering  Plough (NYSE: SGP) has called biotech cheap and compelling.

Huckman also outlined the Dendreon (NASDAQ: DNDN) event for 2009, but without a prediction on which way PROVENGE’s binary event would work out.  We also believe that Dendreon will be acquired IF the FDA allows PROVENGE to go on the market.

The M&A front has totally skipped and forgotten Amylin Pharmaceuticals (NASDAQ: AMLN).  2009 is likely going to be the make or break year.

Whether you like Obama and the new administration or not, one key sector which has been getting speculative investments after a near-decade hiatus is stem cell stocks.  These are very speculative, even for biotech stocks.  But they also hold the potential answers to many regenerative cures against diseases such as Alzheimer’s and more.

The one issue that will affect mergers in 2009 is an easy one to overlook because it is not scientific at all.  CURRENCIES…….. If the US Dollar stays strong, these smaller $500 million to $2 billion biotech companies no longer are dirt cheap to Japanese or European acquirers.

Jon C. Ogg
December 1, 2008

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