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No Holiday For Biopharma P & A

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AP

Normally things tend to slow down a bit between Thanksgiving and New Year's Day.

But this week alone we've already seen two biopharma partnership deals in as many days. First Pfizer and Protalix and now AstraZeneca and Targacept.

M & A (mergers and acquisitions) is the most commonly used Wall Street parlance for dealmaking, but over the past several months at least a couple of industry analysts have said they expect to see more P & A (partnerships and acquisitions) in the sector than M & A. And, so far, they're being proven right.

For example, Lazard Capital Markets analyst Terrence Flynn writes in a research note to clients this morning regarding the AZN-TRGT deal: "In our opinion, the terms of the deal suggest this was a very competitive partnership process."

Not that M & A has gone out of style. After all, this year Roche bought Genentech, Pfizer bought Wyeth and Merck bought Schering-Plough. And speculation continues to run wild about who could be the next takeout target. Of course, it's anybody's guess. But today Bernstein biotech analyst Geoffrey Porges is out with a somewhat counterintuitive note on one of the hottest biotech stocks of 2009. We're talkin' Human Genome Sciences, which is up nearly 1300 percent so far this year.

HGSI is already partnered with GlaxoSmithKline on its experimental Lupus drug called Benlysta. Surprisingly positive late stage data on the treatment is the main reason HGSI shares have gone up so much, in addition to rumors that GSK might buy the company. But Porges says there could be a bit of a stealth suitor. "Our view had been that HGSI's partner GSK was the logical, and maybe only, buyer for the company," Porges writes. But after talking with "astute investors" Porges identifies another suspect. "Amgen, with its capacity and expertise in biological development, biotech manufacturing capacity, rheumatology/dermatology sales and marketing capabilities...could be a more attractive partner for HGSI than GSK, and may be more inclined to recognize and pay for the potential upside potential of Benlysta, as well as the rest of HGSI's portfolio."

But in almost the same breath, he adds, "We have no information that a transaction between Amgen and HGSI is imminent or even being considered." Bernstein makes a market in HGSI and AMGN and a part of the company owns at least one percent of the shares in both companies.

HGSI shares are higher this morning. The company, which many had pretty much left for dead a few months ago, now has a market value approaching $5 billion. So, if someone does decide to buy them it ain't gonna be cheap.

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