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- US drug giant Pfizer just announced that it is acquiring biotech Array BioPharma for $11.4 billion.
- This latest deal points to a trend of big companies snapping up cancer-focused biotechs, with Merck buying the cancer biotech Tilos Therapeutics for up to $773 million last week.
- Investors should consider three biotechs that could get a boost from the trend, according to analysts at Stifel and Cantor Fitzgerald: Exelixis, Blueprint Medicines, and Mirati Therapeutics.
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Giant pharmaceutical company Pfizer just announced that it is buying the biotech Array BioPharma for $11.4 billion, a major deal that’s only the latest example of big drugmakers snapping up cancer-focused biotechs.
It’s a trend that’s well worth investors’ attention, analysts at Cantor Fitzgerald and Stifel say.
They point out three biotechs that could get a boost, either because of growth opportunities down the road for the biotechs or because they are potential deal targets.
Pfizer’s latest move is part of a wider trend among big drugmakers aimed at expanding their portfolios of cancer treatments, which have proven to be lucrative investments across the industry.
Drugmaker GlaxoSmithKline bought up cancer drugmaker Tesaro for $5 billion late last year, for instance, and Eli Lilly announced the acquisition of biotech Loxo Oncology early this year.
Array already sells a combination of two cancer drugs, Braftovi and Mektovi, for the skin cancer melanoma. The biotech is also testing the combination out in more than 30 research trials, including to treat colorectal cancer.
Pfizer offered $48 per share for Array, representing a 62% premium to the stock’s closing price as of June 14, pointed out analysts Varun Kumar and Alethia Young at Cantor Fitzgerald.
And the development should boost other companies developing similar, "targeted" cancer drugs that home in on things like a specific gene mutation in order to better treat cancer, they said.
Across these deals, a common theme is that companies have been eyeing drugs with strong research data that are in late stages of development, "and/or relatively well-defined commercial opportunities in a niche market," they said.
Here are three other cancer biotech companies that could also get a boost, according to Wall Street analysts.
Exelixis
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Founded back in 1994, Alameda, California-based Exelixis has four drugs that are sold to treat various diseases around the world, including thyroid cancer, renal cell carcinoma, melanoma, and hypertension.
The biotech, which is publicly traded, has a market value of almost $6 billion and was recently added to the Standard & Poor’s MidCap 400 index, which measures the performance of profitable mid-sized companies.
Last year, Exelixis reported revenue growth of nearly 90% largely due to an 85% increase in revenue from the drug Cabometyx, which is used to help treat renal cell carcinoma, the most common type of kidney cancer.
The recent Pfizer deal should be a "tailwind" boosting small and mid-size cancer company stocks thought to have good research data supporting their drugs, Stifel analyst Stephen Willey said.
Exelixis was one company that quickly came to mind, Willey said. Still, an investment might be difficult to rationalize because Exelixis might have a shorter duration of patent protection on its products, he said.
Blueprint Medicines
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Another company that Stifel’s Willey said could benefit from investor interest after the Pfizer deal is the Cambridge, Massachusetts-based biotech Blueprint Medicines.
The biotech company, which has a market value of about $4.3 billion, develops drugs for genetically-defined cancers and immunotherapy drugs that use the body’s immune system to fight cancer. Blueprint is also working on therapies for rare diseases.
One approach that the biotech is employing in cancer hones in on enzymes called kinases, which monitor the function of proteins in cells. These types of "kinase drugs" are already approved in the US, but they focus on less than 5% of known kinases, according to Blueprint. The biotech is working to make next-generation, better kinase medications.
Mirati Therapeutics
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Mirati Therapeutics could be on the radar of big drug companies, the Cantor Fitzgerald analysts say.
The company is based in San Diego, California and has a market value of $3.4 billion.
Mirati is developing a cancer drug that targets the KRAS gene mutation, which is commonly seen in cancers but has also been so hard for pharmaceutical companies to reach that it’s been called "undruggable."
For now, "we think it is unlikely to be a potential M&A target at this stage given first clinical data is still pending," and expected in the second half of this year, the analysts said.
But investors are already intrigued by the drug, they noted, and plenty in industry are paying attention to the biotech.
See Also:
- Pfizer just struck an $11 billion deal, and it marks an ambitious shift in the US drug giant’s blockbuster cancer strategy
- The VC’s ultimate guide to sniffing out risky healthcare startups — and not getting tricked into backing them
- We got a look at the slide deck of Bind, a startup that’s raised $70 million to upend the way we pay for healthcare
Source: Business Insider – feedback@businessinsider.com (Clarrie Feinstein)