Episode summary
Dylan Jovine | Biotech Is Heating Up Again: These Buyouts Could Be Just the Beginning
Summary
Biotech and healthcare are starting to see a fresh wave of takeover activity after a long stretch of weakness. The host says there were three multi-billion-dollar takeovers in March, and argues that the pace now looks very similar to the last time biotech was this cheap in 2018, when several portfolio holdings were acquired for roughly 100% gains.
The biggest example he cites is Apellis Pharmaceuticals, a model portfolio holding that jumped 140% after Biogen announced a deal to buy it. He also points to Eli Lilly buying Kintessa Pharmaceuticals for $7.8 billion and Merck buying Tonix Pharmaceuticals for $6.7 billion as signs that big pharma is back in the market.
The central argument is that valuation plus regulatory clarity are driving the buying. The host says uncertainty around FDA and HHS policy had frozen the sector, but that clarity has returned, making it cheaper for large drugmakers to buy small biotech companies with FDA-approved drugs than to build and commercialize those products themselves.
Key takeaways
- The host says M&A in biotech is ramping up, with three multi-billion-dollar takeovers in March alone.
- Apellis Pharmaceuticals jumped 140% after Biogen announced a deal to buy it, according to the host.
- He argues big pharma is buying because biotech valuations are extremely cheap and regulatory clarity has improved.
- The host says a company with an FDA-approved drug can be easier and cheaper to acquire than to develop from scratch.
- He expects big pharmaceutical firms to use their distribution networks to scale acquired drugs far beyond the sellers’ current revenue.
- He compares the setup to 2018, when several biotech holdings were acquired at large gains.
Notable quotes
“There were three multi-billion dollar takeovers in March that you can start to see that pace”
“It's very, very similar pace to the last time biotech was this cheap in 2018”
“Biogen just announced a deal to buy Apellis Pharmaceuticals, which is a stock that is in our model portfolio, sending the shares up 140% yesterday”
“The truth is, these things have been down, have been kicking our butts at Biotech Insider”
“it would be less expensive to buy this company than it would be to try to build or create this drug on our own”
How the episode opens
Good morning. This is Dylan Jovineal behind the markets. Happy Thursday.
Tonight is Thursday, April 2nd, and boy am I grateful to be here with you today. One thing we haven't talked about in a bit of time is the biotech sector, healthcare in general basically, and we've had three takeovers, really merger activity, M&A activity in this sector is really starting to ramp up now. There were three multi-billion dollar takeovers in March that you can start to see that pace.
It's very, very similar pace to the last time biotech was this cheap in 2018, and we owned of the 10 stocks in our model portfolio at that time, four of them were acquired, and they were all like 100% gains or there abouts. It was just a great time to be a biotech investor, and there were three stocks that were taken over in March alone. Biogen just announced a deal to buy Apellis Pharmaceuticals, which is a stock that is in our model portfolio, sending the shares up 140% yesterday.
Now, talk about a great feeling waking up in the morning and seeing a stock that you own up 140%. Eli Lilly is buying Kintessa Pharmaceuticals for $7.8 billion, nice premium there, and Merck said it would buy Tonix Pharmaceuticals for $6.7 billion. So, why are all these deals heating up?
Why is everything happening right now? Why is this such a big deal? Remember, it's all about the clarity, okay?
The pharmaceutical industry, big pharma, two things, two things. First, valuation, number one, number two, clarity. When the Trump administration came into office, RFK Jr., who's running FDA, HHS, all this stuff, they were talking about doing all these different things, and really it froze pharmaceuticals cuz if they didn't know what was going on, basically.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- biotech m&a
- pharma acquisitions
- sector rebound
- buyout opportunities
- regulatory uncertainty
Companies and tickers mentioned
- BIIB
- LLY
- MRK
- Biogen
- Eli Lilly
- Merck
- Apellis Pharmaceuticals
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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