About a dozen biotechnology companies currently stand out as the most likely to receive interest from potential buyers, according to a new review from the investment bank RBC Capital Markets.
The review focused on biotech deal speculation in the media and how it can create opportunity for investors to make “tactical” trades. RBC analyst Leonid Timashev examined four publications known for their commentary on mergers and acquisitions — Bloomberg, The Wall Street Journal, The Financial Times and Betaville — and found around 85 reports since 2021.
Based on the data he could gather, Timashev found significant gaps between not only the “hit rate” of these publications — Betaville was at the lower end, at roughly 20-30%, while others were in the 60-70% range — but also the returns shareholders experienced once these M&A stories were published. They were much better, for instance, if an investor owned shares prior to the announcement or was able to buy them very quickly thereafter.
The median returns were highest, according to Timashev, with Bloomberg and The Financial Times stories, reaching 27% over a 30-day period and, with the latter publication, a 70% return over a 90-day period.
“Given the importance of M&A to the sector, it is not surprising to us that trade publication commentary can drive significant volatility,” the analyst wrote in a note to clients Wednesday.
As part of the analysis, Timashev, who covers biotechs working on new treatments for the heart, the nervous system and cancer, also assessed which companies appear the most poised to engage in deal activity.
The result is a list of 13 takeover targets that includes RNAi specialist Arrowhead Pharmaceuticals and brain drugmaker Xenon Pharmaceuticals, which just last week wowed Wall Street with fresh data for its experimental epilepsy medication.
Companies identified as potential takeover targets by RBC Capital Markets
| Company | Therapeutic focus | Lead program modality | Market cap (in $B) | 1-year stock change |
|---|---|---|---|---|
| Revolution Medicines | Oncology | Small molecule | 19.5 | 156% |
| Ascendis Pharma | Rare disease | Biologic | 14.0 | 38% |
| Arrowhead Pharmaceuticals | Cardiometabolic* | RNA interference | 7.8 | 270% |
| Kymera Therapeutics | Immunology | Small molecule | 6.5 | 135% |
| Rhythm Pharmaceuticals | Rare disease | Small molecule | 5.8 | 62% |
| Xenon Pharmaceuticals | Neuroscience | Small molecule | 5.0 | 54% |
| Dyne Therapeutics | Neuroscience | Nucleic acids | 3.0 | 46% |
| Viridian Therapeutics | Immunology | Biologic | 2.9 | 84% |
| BioCryst Pharmaceuticals | Rare disease | Biologic | 2.3 | 19% |
| Wave Life Sciences | Cardiometabolic, Neuroscience | Nucleic acids | 2.2 | 22% |
| Ocular Therapeutix | Other | Small molecule | 1.9 | 15% |
| Pharvaris | Rare disease | Small molecule | 1.7 | 66% |
| EyePoint | Other | Small molecule | 1.1 | 122% |
SOURCE: Google Finance data, company websites. *Arrowhead’s research varies but cardio makes up a substantial portion of its pipeline.
Also on the list is Revolution Medicines, a cancer drug developer that The Financial Times reported was in talks in January to sell to Merck & Co for possibly north of $30 billion. Such a deal has yet to materialize.
Timashev and his team determined Merck, Bristol Myers Squibb, Biogen, Vertex Pharmaceuticals, Regeneron Pharmaceuticals, Jazz Pharmaceuticals, Acadia Pharmaceuticals and AbbVie are the most likely to be buyers in the near term. AbbVie, notably, was named by The Wall Street Journal as another company trying to acquire Revolution. AbbVie denied that report.
