Alexion Pharmaceuticals' $8.4 billion dollar deal to buy Synageva BioPharma this week has some market participants looking for the next big biotech deal, and there are three names that could soon attract more attention than others.
Among biotech observers, Gilead is mentioned as a potential suitor, largely because Vertex's roster of cystic fibrosis drugs would complement Gilead's Hep C and HIV products. In the first quarter of 2015, Vertex reported a 31 percent increase in product revenue for its lead cystic fibrosis drug, Kalydeco, versus the first quarter of 2014.
Bernstein's Geoff Porges recently published a note detailing how beneficial the acquisition of Vertex would be for Gilead— as well as a win-win for shareholders in both stocks.
"With a 50 percent premium over Vertex's recent stock price, a $45 billion cash and debt deal would be 7-8 percent dilutive to [Gilead] in 2015, but would be accretive after 2017, assuming 27 percent cost savings," Porges wrote.
"Investors could expect Gilead's stock to re-rate to $130-$140 near term," he added.
In its first-quarter earnings call with investors, Gilead CEO John Martin said he was ready to spend some cash on an acquisition or even two. "I can't tell you that we have an appetite for things large or small; it has to be kind of the right fit for Gilead," said Martin. "So, we are open to suggestion; there have been many mentioned out there."
The next company on the list of market watchers is BioMarin Pharmaceuticals. The company's focus on rare diseases is similar to Synageva's. In a sympathy move, BioMarin's stock jumped 5 percent on Wednesday's news of Alexion's acquisition.
BioMarin currently has five rare-disease commercial products on the market that help support its $18 billion dollar market cap.
Deutsche Bank says takeout valuation for BioMarin could be $194-$217 per share if pipeline readouts in the coming quarters are positive. That's a 63 percent to 82 percent potential premium to Wednesday's closing price of $119.
Another potential merger candidate is cancer drug maker, Ariad Pharmaceuticals. Ariad CEO Harvey Berger was ousted at the end of April in a settlement with board member and activist investor Alex Denner of Sarissa Capital. That sparked speculation that more change could be ahead.
The change in management and Ariad's robust cancer treatment pipeline could make Ariad an attractive target to a larger biotech looking to diversify its pipeline with a strong small-capitalization company, analysts say. Cowen has Ariad on its potential acquisition list, saying a possible buyer could be any company active in the cancer space.
As of Friday, Ariad was up 33 percent so far this year, and had a market cap of $1.7 billion.