2 Biotech Stocks That Could Be on Novartis' Buyout Radar
Two companies on the radar
Here are two companies that I feel would be a good fit for Novartis.
Incyte (NASDAQ: INCY ) -- current market cap, $4.18 billion.
Incyte would make a lot of sense as a potential buy candidate for Novartis given that the two companies already have an ongoing licensing pact with FDA-approved myelofibrosis drug Jakafi. Under the current deal, Incyte has the rights to Jakafi within the U.S. with Novartis claiming worldwide rights to the drug everywhere else. Jakafi (known as ruxolitinib in testing) is also being studied as a treatment for polycythemia vera, pancreatic cancer, and solid/hematologic tumors.
Incyte's pipeline isn't too complicated with numerous pharmaceutical pacts, either. Aside from a licensing deal with Eli Lilly (NYSE: LLY ) over baricitinib, which is currently being studied in three trials (rheumatoid arthritis, psoriasis, and diabetic nephropathy), every other pipeline hopeful is either owned by Incyte, or licensed in some full or partial form to Novartis. With peak sales of Jakafi expected to be about $1 billion, and taking into account the potential of its remaining pipeline, as well as sales that would be taken by Lilly via baricitinib, I could see Incyte command a $5.5 billion to $6 billion price point.
BioMarin Pharmaceutical (NASDAQ: BMRN ) -- current market cap, $9.24 billion.
I would certainly quantify BioMarin as much less likely a purchase than Incyte, but I wouldn't rule out its allure to Novartis, which is struggling to find ways to replace Diovan and Femara's rapidly tapering revenue.
The hesitation I could see Novartis having in purchasing a company like BioMarin is twofold. First, BioMarin's area of focus is on ultra-rare diseases, and its treatments often focus on some form of enzyme-replacement therapy. Novartis' focus tends to be on solid tumor and blood-borne cancers, with only a very minimal focus on rare diseases, so this would be quite the step out of its normal comfort zone. Second, BioMarin'