More Evidence Big Pharma Ready To Acquire Biotechs (MRK, PFE, WYE, GILD, BMY, LLY, SGP, CELG, GENZ, BIIB)
We have covered on numerous occasions about how the larger Big Pharma companies either need to or have signaled an openness to making acquisitions in the biotech sector or in the smaller drug companies. Today it was Merck & Co. (NYSE: MRK) out speaking and testing the waters to see how Wall Street would react if it decides to go make a decent buyout. The company said at a Goldman Sachs investor conference in New York that it has the resources to make to significant acquisitions.
Merck’s $62 billion market cap does not allow the company to go after ANY deal it chooses. Here were the estimated sizes of the drugs and biotech players we noted earlier this week when Pfizer was out testing the waters. Actually, these are the ones with market caps that are far enough under that of Merck:
Stock (Ticker) MktCap
Wyeth (WYE) $51.1B
Gilead Sciences Inc. (GILD) $47.5B
Bristol-Myers Squibb Co. (BMY) $47.3B
Eli Lilly & Co. (LLY) $46.1B
Schering-Plough Corp. (SGP) $28.2B
Celgene Corporation (CELG) $25.9B
Genzyme Corp. (GENZ) $18.4B
Biogen Idec Inc. (BIIB) $14.1B
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Pfizer Tests Waters For Major Acquisitions (PFE, AMGN, WYE, GILD, BMY, LLY, SGP, CELG, GENZ, BIIB)
It hasn’t taken long for the speculation machine to roll down Wall Street in 2009. A report from the FT over the weekend shows that Pfizer Inc. (NYSE: PFE) is willing to acquire some large rivals. We believe that this is a mere testing of the waters by the company now that its troubles have been persistent, but we also gave a whole list of these stocks in pharma and biotech which we feel are large enough to make an impact at the company. You can see our full synopsis on this at 24/7 Wall St. and here is the list of the names we included:
Stock (Ticker) MktCap
Amgen Inc. (AMGN) $62.5B
Wyeth (WYE) $51.1B
Gilead Sciences Inc. (GILD) $47.5B
Bristol-Myers Squibb Co. (BMY) $47.3B
Eli Lilly & Co. (LLY) $46.1B
Schering-Plough Corp. (SGP) $28.2B
Celgene Corporation (CELG) $25.9B
Genzyme Corp. (GENZ) $18.4B
Biogen Idec Inc. (BIIB) $14.1B
JON OGG
January 5, 2009
Can Merck Defeat Biotech Leaders? (MRK, RDY, DNA, GILD, GENZ, CELG, AMGN, BIIB)
This morning was an interesting bit of pre-release data on Merck & Co. Inc. where the company gave its full financial forecasts the same as last week and where the company laid out its full pipeline and R&D plans for 2009 and into the next decade. There are a few key observations here and you can see the full summary to the company’s pipleline. The first observation is that it may be a wonder how Merck thinks it can actually be a major competitor to biotech companies. We have long argued that biotech companies are just future drug and pharmaceutical companies. But it is very difficult to argue that entrenched drug companies can become biotech leaders in the same manner.
Merck is launching Merck BioVentures, a new division to make both new, follow-on, or generic biotech drugs. Some generic biologic drugs have been in Europe but have for the most part absent to outlawed in the U.S. Generally speaking, these have longer patent exclusivity and in many cases are allowed to exist without competition.
This issue is not just one of humane aspects. It also has political aspects that could come full circle in the coming months. With a new administration and a new regime, it is unknown just how much competition these biotech operators will have. They have well over a decade of established case law in their favor, so any changes may require legal maneuvering on top of just the regular lobbying efforts.
But, back to Merck. Its BioVentures unit is supposed to utilize new science to speed up drug development. Merck acquired a technology called glycoengineering to more rapidly create antibodies and proteins for drugs in yeast rather than the traditional mammal cells used by many other companies.
What is interesting is that Merck said the unit will build a commercial factory by 2012 and will invest some $1.5 billion in research by 2015. The unit’s goal is to launch six or more generic biotech drugs between 2012 through 2017. The company’s dates are somewhat targeted at patent expiration dates for several big biotech drugs.
Merck has a market cap of roughly $56 billion and is expected to have somewhere around $24 billion in 2009 sales according to research estimates. Below are the major biotech players whose market capitalization rates are greater than $10 billion. We have also included the Thomson Reuters (First Call) estimate (rounded down) for the next fiscal year (2009). Here is that list:
COMPANY (TICKER) Mkt Cap 2009R~
Genentech (NYSE: DNA) $81.6 B $14.4 B
Amgen Inc. (NASDAQ: AMGN) $61.6 B $15.4 B
Gilead Sciences, Inc. (NASDAQ: GILD) $43.0 B $6.3 B
Celgene Corporation (NASDAQ: CELG) $24.1 B $2.9 B
Genzyme Corporation (NASDAQ: GENZ) $17.3 B $5.2 B
Biogen Idec Inc (NASDAQ: BIIB) $14.1 B $4.4 B
Merck may be able to pull a rabbit out of the hat at the magic show. And it might not. The company is slashing and burning right now as it gears for a slower and more competitive 2009. Dr. Reddys (NYSE: RDY) has been able to make some biotech copies and many AIDS drug patents have just been outright stolen or broken in some countries. This is an argument over “patent law” and “intellectual property” versus what is humane or what many consider as a God-given right under the humanitarian front. Regardless of any personal positions in that argument, there are many who argue that generic biotech drugs will by and large be failures and far less effective than their base-biotech.
Wall Street gave it a thumbs-down vote. Shares closed down about 2% today with a weak market. Having big blockbuster plans is one thing, but he time frame seems to be a reach based upon the cuts it has been making. This sales pitch also requires a bit more meat to it.
If Merck wants to be the biotech leapfrog shop, it might have to go do it the old fashioned way. It might have to acquire companies. It has before.
Jon C. Ogg
December 9, 2008
Osiris and Genzyme Ink Adult Stem Cell pact (OSIR, GENZ)
Osiris Therapeutics (NASDAQ: OSIR) and Genzyme (NASDAQ: GENZ) have entered into a pact to develop and commercialize what the companies are calling first-in-class adult stem cell products. Osiris was also just mentioned yesterday as one of the many stem cell beneficiaries of the 2008 presidential election.
BioHealth Upgrades & Downgrades on Wall Street (GHDX, GENZ, GSK, ISPH, LXRX, MEDX, MRK, QLTI, SHPGY)
There have been other calls in drug, biotech, and healthcare stocks today but these are the key standouts that have been seen making an impact on stocks after the open of trading:
- Genomic Health (GHDX) Cut To Hold at Canaccord.
- Genzyme (GENZ) Started as Overweight at Morgan Stanley.
- GlaxoSmithKline (GSK) Cut to Sell at Goldman Sachs.
- Inspire Pharma (ISPH) Cut To Underweight at Morgan Stanley.
- Lexicon Pharma (LXRX) Cut to Underweight at Morgan Stanley.
- Medarex (MEDX) Cut to Equalweight at Morgan Stanley.
- Merck (MRK) Raised to Buy at Goldman Sachs.
- QLT (QLTI) Cut to Underweight at Morgan Stanley.
- Shire (SHPGY) Cut to Neutral from Buy at Goldman Sachs.
Jon C. Ogg
September 8, 2008
Short Sellers Lightening Up Against Biotechs (AMGN, GILD, CELG, GENZ, BIIB)
Short sellers haven’t just eased up on betting against financial stocks. If you look at the major biotech stocks not involved in mergers you will see an across the board drop in the short interest in major biotechs. Below we have show the dates and the changes to represent each of the major names:
- Amgen (AMGN) 07/31/2008 short interest 31,659,693 down 22.96% from 07/15’s 41,097,709 shares.
- Gilead (GILD) 07/31/2008 short interest 33,141,320 down 0.06% from 7/15’s 12,632,227 shares.
- Celgene (CELG) 07/31/2008 short interest 12,301,038 down 20.38% from 7/15’s 5,642,397 shares.
- Genzyme (GENZ) 07/31/2008 short interest 6,839,521 down 8.21% from 7/15’s 3,888,041 shares.
- Biogen Idec (BIIB) 07/31/2008 short interest 7,467,029 down 2.67% from 7/15’s 4,819,980 shares.
With all the merger activity happening in the sector, you can imagine that short sellers probably wanted to avoid walking in one morning to find the stock up 25% on a merger announcement.
Jon C. Ogg
August 12, 2008
If Genentech Is Acquired, Others May Follow (DNA, AMGN, BIIB, GENZ, GILD, CELG, IMCL)
Genentech (NYSE: DNA) is just one of the next biotechs (and just large companies on discount for that matter) that is likely to disappear as far as US-based shareholders are concerned. The largest biotech company by market cap has been offered $89.00 per share in cash by parent Roche for the 44% minority stake it doesn’t own.
Genentech shares are trading over $90.00 as it is believed that if Roche wants to recapture this after a 25 year history of being public that it might have to go closer to $100.00. We’d watch other biotech Amgen (AMGN), Biogen-Idec (BIIB), Genzyme (GENZ), Gilead (GILD), Celgene (CELG), ImClone (IMCL) and others on this.
The US-biotech and other critical spaces may about to be getting much smaller.
JOn Ogg
July 21, 2008
Genzyme Targeting Genetic Disorders in New Pact (GENZ)
Genzyme Corporation (Nasdaq: GENZ) has formed a collaboration and development pact to go after genetic disorders. It has partnered with PTC Therapeutics, Inc. in an exclusive global collaboration to develop and commercialize PTC124. This is PTC’s novel oral therapy in late-stage development for the treatment of many genetic disorders due to nonsense mutations.
PTC will commercialize PTC124 in the United States and Canada, while Genzyme will commercialize the treatment in all other countries. Genzyme is making an up-front payment of $100 million to PTC and has committed to potential milestone and royalty payments to PTC as well in an amount that could be up to $337 million. PTC will be financially responsible for one ongoing and three additional clinical trials of PTC124.
The release notes that this is potentially applicable to hundreds of genetic diseases. It is currently being evaluated in a phase IIb trial for Duchenne muscular dystrophy (DMD), and a phase IIb trial in cystic fibrosis (CF) is expected to begin by the end of this year.
Jon C. Ogg
July 17, 2008
Short Interest Volume Changes: MAJOR BIOTECH (AMGN, GILD, BIIB, CELG, GENZ)
We ran a screen of the top five NASDAQ biotech stocks by market cap to look at the short interest changes from the end of May to mid-June. Amgen Inc. (NASDAQ: AMGN) had the largest gains in short selling by far and the others were mixed. We also screened Gilead Sciences Inc. (NASDAQ: GILD), Biogen Idec Inc. (NASDAQ: BIIB), Celgene Corporation (NASDAQ: CELG), and Genzyme Corp. (NASDAQ: GENZ).
Amgen Inc. (AMGN)
AS OF DATE Short Int. Change
06/13/2008 48,430,933 113.55%
05/30/2008 22,678,517 -8.48%
Gilead Sciences Inc. (NASDAQ: GILD)
AS OF DATE Short Int. Change
06/13/2008 34,676,528 6.77%
05/30/2008 32,478,444 -0.65%
Celgene Corporation (NASDAQ: CELG)
AS OF DATE Short Int. Change
06/13/2008 12,951,360 -5.98%
05/30/2008 13,775,373 -15.68%
Biogen Idec Inc. (NASDAQ: BIIB)
AS OF DATE Short Int. Change
06/13/2008 7,467,264 17.66%
05/30/2008 6,346,464 -6.51%
Genzyme Corp. (NASDAQ: GENZ)
AS OF DATE Short Int. Change
06/13/2008 5,751,563 1.17%
05/30/2008 5,684,945 1.12%
Jon Ogg
June 25, 2008
Genzyme & ISIS Amend Hereditary Cholesterol Pact (GENZ, ISIS)
Genzyme Corp. (NASDAQ: GENZ) and Isis Pharmaceuticals, Inc. (NASDAQ: ISIS) have finalized their license and collaboration agreement for mipomersen, a novel lipid-lowering drug discovered and developed by Isis that is in phase 3 clinical development. This is more of an amended terms to the deal rather than a new deal entirely.
Genzyme will receive exclusive worldwide rights to mipomersen. Enrollment is expected to be completed during the second half of this year in a pivotal study of mipomersen in homozygous familial hypercholesterolemia, and a new trial in apheresis-eligible patients is expected to begin. In short, this is for hereditary high cholesterol that is difficult to lower and that traditional treatment fails to correct.
Isis will receive a $175 million license fee for mipomersen and Isis received a $150 million payment in February from Genzyme to purchase 5 million shares of Isis common stock at $30 per share (Isis stock sits at $14.03, but shares weren’t even $20.00 earlier this year).
Updated deal terms show that Isis will contribute up to $50 million in additional development funding to bring Isis’ development funding commitment up to $125 million through the project. After that hurdle has been hit, Isis and Genzyme will share development costs equally.
The initial Isis development funding commitment and the shared funding will end when the program is profitable. In exchange for this additional contribution, Isis has the opportunity to receive $75 million in milestone payments early. The companies will transition the mipomersen IND and all regulatory authority to Genzyme over the next 30 days and Genzyme will take the lead on discussions with regulatory agencies and filings.
ISIS market cap is $1.34 Billion as of yesterday’s close and it has many other possible candidates in its pipeline for indications such as cancer, diabetes, obesity, arterial disease, MS, Asthma, AIDS, ocular disease, and more.
Jon Ogg
June 24, 2008