The drug/pharma sector is characterized by aggressive M&A activity. Given that it takes several years and millions of dollars to develop new therapeutics from scratch, large pharmaceutical companies, sitting on huge piles of cash, regularly buy innovative small/mid-cap biotech companies to build out their pipelines. Also, sloppy sales of mature drugs, dwindling in-house pipelines, government scrutiny of drug prices and emergence of big tech firms like Apple and Google in the healthcare industry whet the M&A appetite of large drugmakers. Fast growing and lucrative markets such as oncology and gene therapy have mainly been the focus areas for M&A activities.
However, after a flurry of deals in 2019, M&A activity significantly slowed down in 2020, mainly due to the impact of the coronavirus pandemic. There were hardly any M&A announcements in the first half of 2020.
However, it seems that M&A activity is picking up in the second half. Last month, Gilead Sciences (
GILD Quick Quote GILD - Free Report) announced that it will acquire oncology company, Immunomedics for $88 per share in cash or approximately $21 billion. In August, Johnson & Johnson ( JNJ Quick Quote JNJ - Free Report) announced a definitive agreement to acquire Momenta Pharmaceuticals for approximately $6.5 billion in an all-cash deal. The deal closed this month. In August, Sanofi ( SNY Quick Quote SNY - Free Report) also announced a definitive agreement to buy San Francisco-based late-stage biotech, Principia Biopharma for an aggregate equity value of approximately $3.68 billion. The Sanofi/Principia merger closed last month. In April, Gilead bought Forty Seven for $4.9 billion. The Gilead/Forty Seven deal was announced in March.
Some of these buyouts came at significantly high premiums. Continuing the trend, on Monday, Bristol Myers Squibb (
BMY Quick Quote BMY - Free Report) announced a definitive deal to acquire MyoKardia for $13.1 billion. The offer price of $225.00 per share in cash represents a premium of 61.2% on MyoKardia’s Friday’s closing price of $139.60 per share. The deal has been approved by boards of both companies. The transaction is expected to close in the fourth quarter of 2020.
The acquisition will add MyoKardia’s lead product mavacamten, an experimental drug that treats obstructive hypertrophic cardiomyopathy (HCM), a chronic heart disease, to Bristol-Myers’ portfolio, thereby strengthening its leading cardiovascular franchise. Bristol-Myers’ cardiovascular franchise currently includes Eliquis, a blood thinner. A new drug application seeking approval of mavacamten for symptomatic obstructive HCM is expected to be filed in the first quarter of 2021. The addition of mavacamten will give Bristol-Myers the necessary diversification from its oncology drugs.
Shares of MyoKardia soared almost 58% on Monday. Shares of Bristol Myers have declined 7.8% while MyoKardia has risen 202.3% this year so far. The
industry has gone down by 3%. A chart showing the share price movement of the stocks is given below:
Though all these deals are relatively smaller than the 2019 mega-mergers of Bristol-Myers and AbbVie-Allergan, they nonetheless offer hope that after a dried up first half, M&A activity in the pharma sector is something for investors in biotech/drug stocks to look out for.
Both Bristol-Myers and MyoKardia have a Zacks Rank #3 (Hold). You can see
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