UBS analyst Andrew Peters suggested that a recent takeover big in the biotech space of California-based InterMune, Inc. by Roche was the harbinger of more M&A rumors to come.
He noted that Achillion Pharmaceuticals, Inc. was a potential takeover target, which caused the company’s stock to jump to a 52-week high of $11.52 in Monday’s trading. This was echoed by Deutsche Bank’s Robyn Karnauskas, who commented “If you want to compete with Gilead Sciences, Inc. , you have to buy Achillion. We think that’s one take-out target.”
Swiss-based Roche’s announcement that they were purchasing InterMune, Inc. for a cash transaction totaling $8.3 billion was apparently an opening salvo in biotech M&A. Headquartered in New Haven, Connecticut, Achillion focuses on multiple candidates for the treatment of hepatitis C (HCV). The company has at least four HCV products in its pipeline, ACH-3102, ACH-2684, Sovaprevir, and ACH-3422. The company recently announced a patent had been granted for ACH-3012 and structurally related compounds. In a press release, company President and CEO Milind Deshpande, said, “We believe that this key patent grant will provide another important anchor for Achillion’s intellectual property portfolio.”
Hepatitis C affected approximately 4 million people in the U.S. and more than 170 million worldwide. It is a chronic liver disease that causes liver inflammation caused by the Hepatitis C virus. Complications to HCV are the leading cause of liver transplantation in the U.S. and is responsible for more than annually in the U.S. than the human immunodeficiency virus (HIV).
Achillion has also recently announced a 100% success rate in the primary end point of ACH-3012 when used in combination with Sovaldi, manufactured by Gilead Sciences, Inc. This was the result of an ongoing Phase 2 proxy study. Sovaldi is predicted to bring in approximately $13 billion in sales this year.
UBS didn’t limit its recommendation to just Achillion. Andrew Peters also cited Puma Biotechnology , and Medivation, Inc. , which has recently partnered with Astellas Pharma Inc. on a drug for prostate cancer. All the companies’ stock jumped Monday as a result. Although the Roche-InterMune deal has tweaked the interest of investors in the biotech space, in July, Federal Reserve Chair Janet Yellen in her semiannual Monetary Policy Report to Congress, wrote, “Nonetheless, valuation metrics in some sectors do appear substantially stretched—particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year.”
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