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M&A Heats up in Biotech
09/22/2016 9:00 am EST
The combination of extremely low interest rates and thinning pipelines at big drug companies make for an ideal environment for M&A in the biotech sector, observes John McCamant, editor of The Medical Technology Stock Letter.
A scarcity of mid-cap biotechs is creating a supply/demand imbalance in favor of the smaller biotech as acquirers are having to outbid each other.
Therefore we have a rough gauge of today’s valuation for takeovers of the larger more successful companies with blockbuster sales ($1 billion) at a relatively early stage of their growth curve.
Oncology remains the sweet spot for M&A as the market for new cancer drugs has never been better as an aging and wealthy population remains willing to pay a significant premium for life extending, more effective and safer drugs.
While there remains a real controversy regarding the high price of drugs, truly innovative cancer drugs continue to demand premium pricing when they deliver a clear survival benefit.
Sanofi is considered the most aggressive of the M&A shoppers as they just spent months on their failed bid for Medivation.
Their growing, royalty-based revenue streams may lead to less dilution/accretive near-term and their wholly-owned pipeline assets representing long-term growth drivers for the acquirer.
By John McCamant, Editor of The Medical Technology Stock Letter