WINDSOR, ON / ACCESSWIRE / May 26, 2016 / The Wealthy Biotech Trader (or “WBT”), an investment newsletter focused on showing everyday investors new opportunities in rapidly growing, little-known, biotech, pharma and medical device stocks making news and subsequent market moves, would like to alert investors about the recent surge in M&A activity in the biotech sector and how they can play the arising opportunities.
Companies included: Endonovo Therapeutics (ENDV); Medivation (MDVN); Celator Pharmaceuticals (CPXX); Pain Therapeutics (PTIE); Acadia Pharmaceuticals (ACAD); Raptor pharmaceuticals (TPTP)
This year has gotten off to a pretty rough start for the biotech sector which had enjoyed an impressive run back in 2015. The biotech ETF, iShares NASDAQ Biotechnology (IBB) has shed 22 percent of its value on an YTD basis compared to the S&P 500 which has risen by 45 basis points. While some investors have already started to panic, we believe that the depressed valuations of small-cap biotechs such as Endonov Therapeutics (ENDV) could lead to increased M&A activity which could reignite the momentum witnessed last year.
Interestingly, investors haven’t had to wait long as Pfizer has already set the pace for other players after agreeing to acquire Anacor Pharmaceuticals for $5.2 billion, in a deal announced earlier last week. The deal which will see Pfizer buy Anacor’s shares at $100 each values the company at a 55 percent premium sending out a strong signal to investors that biotechs are significantly under-priced. According to Mindy Perry, a healthcare sector portfolio manager for Manulife Asset Management a lot of assets have gotten extremely cheap which could kick-start more mergers and acquisitions in the sector.
As such one company that we believe exhibits strong potential as a takeover target is Endonovo which is currently developing bioelectronics devices and cell therapies for regenerative medicine. The company’s lead products are Immunotronics and Cytotronics which utilize Time-Varying Electromagnetic fields (TVEMF) to treat acute liver failure (ALF) and graft-versus-host diseases (GVHD) respectively. Both of these devices’ target market offer prospects for massive returns when taking into consideration that the company has filed an application with the FDA to have the biolectronic device for treating ALF recognized as a Humaniatrean Use Device.
Should the FDA approve the application, this will be another major catalysts for the company coming right on the heels of an approval by the FDA to give its Cytotronics orphan drug designation for the treatment of GVHD in February this year. Factoring in the indications for the devices with each having a multibillion opportunities, we believe that Endonovo’s current valuation of $42 million is pretty conservative and could attract the attention of the larger players.
Other potential takeover targets
Medivation (MDVN) with a market capitalization of $10 billion is one of the large cap biotechs that is actively being targeted for acquisition. On an YTD basis the stock has gained 26 percent and just last month the company turned down a $9.3 billion acquisition bid by Sanofi. Amgen and Pfizer are also rumoured to be making offers with the main target being the company’s lead drug Xtandi. Apart from the fact that Xtandi is used in pre and post chemotherapy prostate cancer patients, it has recorded more than $2 billion in annualized sales. Additionally, plans to expand the use of Xtandi to breast cancer treatment could mean that potential acquirers may consider paying more for the company.
Raptor pharmaceuticals (TPTP) is a commercial-stage, global biopharmaceutical firm that develops and commercializes therapeutics for rare and potentially fatal orphan diseases. The company’s stock has been volatile over the past year and just recently began stabilizing at the $5 range. One thing we believe would attract buyers to this company is the fact that it’s trading at a fairly conservative valuation (about 4X revenue) compared to its peers. Its two lead products are PROCYSBI which treats a medical condition called nephropathic cystinosis and QUINSAIR which provides a rapid delivery of anti-biotic therapy for chronic lung infections. For prospective buyers, Raptor offers the potential for sustainable earnings growth based on the fact that QUINSAIR is only approved in Europe and Canada and an FDA approval in the U.S will without a doubt translate to growth in the top line.
Celator Pharmaceuticals (CPXX) recently announced that the FDA had granted breakthrough therapy designation for Vyexos which is used for the treatment of acute myeloid leukaemia (AML). Based on encouraging Phase III results in the clinical trials which showed Vyexos had improved overall survival rates for secondary AML patients and at the same time delivered increased safety to standard of care, we strongly believe that Celator is well primed for an acquisition. Moreover, the company will be filing for FDA approval by the end of the third quarter and with the breakthrough designation of Vyexos this means it can be commercialized much faster and become the new standard of care.
Pain Therapeutics (PTIE) is a biopharmaceutical company that develops novel drugs in the United States whose lead drug candidate is REMOXY, a proprietary abuse-deterrent oral formulation of oxycodone for pain relief. The drug recently completed phase III clinical trials and expects to receive FDA approval in the near future which makes it an excellent acquisition target for companies seeking to expand their pain relief therapy portfolio. The company’s shares have surged 30 percent on an YTD basis indicating that investors have already started taking note of this small biotech’s achievements. Also, Pain’s low valuation of about $100 million coupled with the fact that it has $35 million in cash means that acquirers will be getting a pretty good deal.
Acadia Pharmaceuticals’ (ACAD) shares have been on an uptrend over the past week, gaining a little over 6 percent as it continues to be an attractive acquisition target. There have been plenty of acquisition rumours surrounding this company following the approval of its drug Nuplazid for the treatment of Parkinson’s psychosis. Nuplazid which treats delusions and hallucinations in patients with psychosis caused by Parkinson’s disease – a progressive disease that affects the central nervous system and is known for causing tremors is the only drug that has been approved by FDA for this condition. The company is also conducting research on whether the drug can be used to treat schizophrenia and Alzheimers attracting the attention Biogen which already has a number of Alzheimer’s drugs in its pipeline.
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