Big Pharma Goes Shopping

09/16/2008 12:00 am EST

Focus: STOCKS

Josh Wolfe

Editor, Forbes/Wolfe Emerging Tech Report

Josh Wolfe, editor of Forbes/Wolfe Emerging Tech Report, guesses which biotech firms may be bought by big pharmaceutical companies.

Some pharmaceutical companies are starting to buy out their competition: Sanofi-Aventis (NYSE: SNY), for instance, bid $2.6 billion in June for Czech generic drug maker Zentiva, of which they already owned 25%. If the merger is successful, the deal will add more than 180 generic drugs to Sanofi's portfolio.

So, what's next on Big Pharma's shopping list? There are a few biotech firms that we'll be keeping an eye on. First up is Cambridge, Mass-based Biogen Idec (Nasdaq: BIIB). Biogen profited from the hype surrounding Roche's attempt to buy out Genentech (NYSE: DNA), as Biogen partners with Genentech on the drug Rituxan, a treatment for non-Hodgkins lymphoma and rheumatoid arthritis.

Biogen's revenues from the second quarter were up 28% from the second quarter last year, propelled by sales of Avonex, Tysabri, and Rituxan. Avonex and Tysabri are biotherapeutics for patients with relapsing forms of multiple sclerosis. The product pipeline includes 15 products in Phase II clinical trials and beyond.

This is the kind of biotech company that can offer a pharmaceutical company well-performing products that aren't at risk for generic copycats as well as the potential of novel pipeline drugs. (It closed below $47 Monday—Editor.)

Also in the Cambridge biotech zone is Genzyme (Nasdaq: GENZ), which saw revenue from sales of its drug Myozyme rise 65% year over year on top of double-digit growth from multiple other drugs. Overall, the company's revenue increased 25% to $1.17 billion [from the second quarter of] 2007.

Genzyme is expecting six approvals for new products or broader indications for existing products, including the US and European launch of Mozobil, a drug that enables patients with certain types of cancer to successfully receive stem cell transplantations and is expected to reach peak annual sales of $400 million. (The stock closed below $80 Monday—Editor.)

Gilead Sciences (Nasdaq: GILD), headquartered in Foster City, Calif., boasts a growing pipeline of novel drugs for the treatment of hypertension, cystic fibrosis, HIV, and hepatitis, including three drugs currently in Phase III clinical trials. That's in addition to 11 products already on the market, including Atripla, the first single-tablet regimen for the treatment of HIV. 

The biotech's primary areas of focus are antivirals, cardiovascular, and respiratory diseases. Annual revenues exceed $4 billion. (It closed below $48 Monday—Editor.)

Roche's bid on Genentech has stirred up a lot of hype around biotech, but beneath the hype something real is going on. As generics threaten the pharmaceutical companies and biotechs threaten the generics, even small biotech startups can begin to make their way up the food chain. Mergers and acquisition spur more mergers and acquisitions, as the whole pharmaceutical industry sweats out patent expirations and dry pipelines. The gold rush has just begun.

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