Biotechnology merger and acquisition activity could get a booster shot now that U.S. tax reform is cutting corporate tax rates and allowing companies to repatriate cash that's been piling up overseas. We'll have to wait and see if tax reform sparks biotech M&A in 2018, but if it does, then I think suitors could come knocking at Portola Pharmaceuticals (NASDAQ: PTLA), Tesaro Inc. (NASDAQ: TSRO), bluebird bio (NASDAQ: BLUE), Esperion Therapeutics (NASDAQ: ESPR), and GlycoMimetics (NASDAQ: GLYC).
Cashing in on coagulation
Seniors are at risk of developing blood clots after hospitalization, and preventing rehospitalization because of clots is a multibillion-dollar opportunity for Portola Pharmaceuticals.
IMAGE SOURCE: GETTY IMAGES.
Portola Pharmaceuticals won FDA approval of Bevyxxa in 2017, and commercial sales should commence soon. In clinical trials, Bevyxxa, a factor Xa anticoagulant, beat Lovenox, so it has a good shot at replacing it as a way to prevent venous thromboembolism in acute, medically ill patients. If sales of Bevyxxa are strong out of the gate, then it could make Portola Pharmaceuticals an attractive takeover target, because Lovenox was hauling in $3 billion annually before its patent expired.
An acquirer might also emerge if the FDA OK's Portola Pharmaceuticals' AndexXa this year. AndexXa has a shot at becoming the first FDA-approved drug specifically designed to reverse the anticoagulation effect of factor Xa drugs, including Bevyxxa, Johnson & Johnson's (NYSE: JNJ) Xarelto, and Bristol-Myers Squibb and Pfizer's (NYSE: PFE) Eliquis.
Xarelto and Eliquis have already become multibillion-dollar drugs by displacing warfarin's use in patients with atrial fibrillation or following hip or knee surgery. If AndexXa is approved, these drugs could become even more widely used because they're not as often prescribed in elderly patients at risk of bleeding events or surgery.
Bristol-Myers Squibb and Pfizer have already licensed AndexXa in Japan, so it's conceivable they might be interested in owning Portola Pharmaceuticals lock, stock, and barrel. Of course, that could depend on how smoothly Bevyxxa's launch goes and if AndexXa gets a green light.
Profiting from PARP
Tesaro's markets Varubi, a medicine used to prevent nausea in chemotherapy patients, and Zejula, an ovarian-cancer drug, and sales could climb significantly this year and attract the attention of a bigger company.
The recent FDA approval of an IV formulation of Varubi gives Tesaro an opportunity to win market share from Merck & Co.'s (NYSE: MRK) Emend, a competing antinausea drug with $550 million in annualized sales.
Zejula's market opportunity could be even bigger, though. In less than a year, it's already become the most widely prescribed PARP inhibitor used to prevent cancer cells from using the PARP enzyme to repair themselves. As a result, Tesaro expects to report sales of between $40 million and $50 million for Q4 2017. However, that could only be scratching the surface. Use in the post-treatment maintenance setting is increasing, and studies could expand its use into early-line ovarian cancer and non-small-cell lung cancer treatment. Those markets are worth about $8 billion.
Tesaro also has three monoclonal antibodies in trials targeting various tumor types. One of those drugs is TSR-042, a PD-1 drug that's being evaluated as a treatment for MSI-H positive tumors that occur in about 20,000 people per year.
Admittedly, Tesaro isn't the only PARP player, but Zejula's success so far and the potential for its use in many more people could be enough of an incentive for an acquirer to step up.
A massive advance in multiple myeloma
The multiple myeloma market is worth billions of dollars in sales annually, and bluebird bio's chimeric antigen receptor T-cell therapy, bb2121, is delivering data that suggests it could reshape the indication someday.
In early-stage trials, bb2121 delivered a 94% objective response rate and 56% complete response rate in 21 patients who had previously received a median seven treatments. If those results are duplicated in an ongoing pivotal trial, then an approval for its use in the fourth-line setting could come as soon as 2019.
If bb2121 wins approval, then it has a very good shot at becoming a blockbuster because it's licensed to Celgene, the market-share leader in first-, second-, and third-line multiple myeloma treatment. Its long-standing dominance in the indication should make marketing bb2121 easy. Assuming everything goes OK, bluebird bio will split U.S. profit on bb2121 with Celgene, and it will collect milestones and royalties on ex-U.S. sales.
An acquirer could find that co-commercialization opportunity in the U.S. very attractive, especially since acquiring bluebird bio would also net a buyer two other gene therapies that are approaching the finish line. LentiGlobin, a beta-thalassemia treatment, and Lenti-D, a treatment for cerebral adrenoleukodystrophy, could be filed for FDA approval in the coming year or so. A trial evaluating LentiGlobin in sickle-cell disease could make bluebird bio even more enticing.
It's anyone's guess who might step up to buy it, but I could argue the deal makes sense for any company that currently markets multiple myeloma drugs, including Celgene, J&J, Merck & Co., Amgen (NASDAQ: AMGN), and Bristol-Myers Squibb.
IMAGE SOURCE: GETTY IMAGES.
Before losing patent protection, cholesterol-busting drug Lipitor was the world's best-selling drug, with $13 billion in annual sales. Today, generic Lipitor remains one of the most prescribed medicines on the planet. However, millions of patients still fail to hit their cholesterol-lowering target.
In a bid to change that, Esperion Therapeutics is developing bempedoic acid, a clinical-stage cholesterol drug that can be used alongside Lipitor. In phase 2 trials, combining bempedoic acid and Lipitor reduced bad cholesterol by an additional 20%. Results from phase 3 trials are expected this year, and if they're good, then an FDA application could be filed soon thereafter.
A study that's evaluating bempedoic acid alongside Zetia, another common cholesterol drug, reduced bad cholesterol by 48%, too. Phase 3 results for that combination are on deck this year as well, so a win for that combination could make Esperion Therapeutics an even better company to buy.
Management estimates that up to 12 million people in the U.S. alone could benefit from new cholesterol-lowering options like bempedoic acid, so clearly, the market opportunity here is big.
In my opinion, at least three companies could be intrigued enough to buy Esperion Therapeutics: Pfizer, Regeneron (NASDAQ: REGN), and Amgen. Pfizer commercialized Lipitor, and it's familiar with Esperion's management because Esperion Therapeutics' founder, Roger Newton, spearheaded Lipitor's development. Regeneron and Amgen could also be interested because each of them already markets another class of cholesterol-lowering drug called a PCSK9 inhibitor. Because they've already invested a lot of money building out their PCSK9 sales teams, bolting on bempedoic acid could make sense.
A long-shot pick
Chemotherapy remains a backbone in treating acute myeloid leukemia, and recently, GlycoMimetics reported mid-stage trial results suggesting its GMI-1271 can help chemotherapy work better.
In heavily pre-treated AML patients, adding GMI-1271 to MEC chemotherapy generated a 43% clinical remission rate and median overall survival of 9.4 months. Comparatively, in a historical, matched control group of patients receiving the chemotherapy cocktail MEC, overall survival was only 5.4 months.
GMI-1271 also showed intriguing efficacy in older, newly diagnosed AML patients. In trials, adding GMI-1271 to 7+3 chemotherapy resulted in a 68% response rate and overall survival of 15.8 months. For comparison, the overall survival of a matched control group was 12 months for 7+3 on its own.
What could make GMI-1271 more intriguing, though, is it may make it easier for patients to tolerate chemotherapy. Usually, adding drugs to chemotherapy increases toxicity, but that doesn't appear the case for GMI-1271. There weren't any obvious signs of incremental toxicity in its trials, and there was a lower-than-expected rate of grade 3-4 mucositis in MEC chemotherapy patients. Historically, severe mucositis occurs in 20% to 25% of MEC patients, but it happened in only about 4% of patients receiving MEC and GMI-1271.
Phase 3 studies are planned to begin next year, and there's no telling how those trials will read out. Nevertheless, GM-1271 could be intriguing to a cancer company already marketing AML drugs. One possibility is Jazz Therapeutics (NASDAQ: JAZZ). In 2017, Jazz Pharmaceuticals paid $1.5 billion to acquire Celator so that it could land Vyxeos, an optimized combination of the two chemotherapies that comprise the 7+3 therapy that's used in relapsing AML.
One more thing to consider
There's no way of knowing if these companies are on anyone's radar, so investing in them because of their acquisition potential isn't wise. Fortunately, all five of these names have a shot at success as a standalone company, and that makes them intriguing buys regardless of whether an acquirer materializes. Obviously, anything can (and often does!) happen in biotech, so remember, these stocks are risky.
More From The Motley Fool
- 3 Growth Stocks at Deep-Value Prices
- 5 Expected Social Security Changes in 2018
- 6 Years Later, 6 Charts That Show How Far Apple, Inc. Has Come Since Steve Jobs' Passing
- 10 Best Stocks to Buy Today
- The $16,122 Social Security Bonus You Cannot Afford to Miss
- Bitcoin's Biggest Competitor Isn't Ethereum -- It's This
Todd Campbell owns shares of Esperion Therapeutics, Gilead Sciences, Pfizer, and Portola Pharmaceuticals. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Bluebird Bio, Gilead Sciences, and Johnson & Johnson. The Motley Fool has a disclosure policy.