Big pharma is facing another round of major patent expirations. Before the decade’s end, Bristol Myers Squibb (BMS) will lose exclusivity for the megablockbuster blood thinner Eliquis as well as its all-star cancer drug Opdivo.
Merck, for its part, is also poised to lose patent protection for its flagship cancer medication Keytruda before 2030. Several other high-value medications like AbbVie‘s Humira and BMS’s Revlimid have already lost patent protection, and copycat drugs are weighing heavily on their sales.
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Although most pharma companies spend billions on developing drugs to replace aging stars, mergers and acquisitions (M&A) serve as another important tool drug developers frequently use to restock the cupboard, so to speak.
For investors, M&A can provide a quick, and often hefty, profit windfall. In only the last few weeks, several deals have been announced at premiums ranging from 22% to 104% relative to the acquired company’s pre-deal closing price. Armed with this background, here is a look at two biopharma companies that could be on big pharma’s radar in 2024.
BridgeBio Pharma
BridgeBio Pharma (BBIO 0.20%) is a commercial-stage company developing treatments for rare diseases and cancers with a genetic component. The biopharma has repeatedly been subject to the buyout-rumor mill over the past few years due to the enormous commercial potential of its late-stage heart drug acoramidis.
Last month, BridgeBio submitted the drug for review to the Food and Drug Administration (FDA) as a possible treatment for a rare but life-threatening heart condition called transthyretin amyloid cardiomyopathy (ATTR-CM). Even as a later-line option for ATTR-CM behind Pfizer‘s Vyndaqel/Vyndamax franchise, Wall Street analysts still expect it to achieve blockbuster status by 2030 if approved.
Another reason BridgeBio has been making the rounds on the buyout-rumor mill is its experimental treatment, infigratinib, indicated for achondroplasia (short stature). The drug is in a pivotal-stage trial, with top-line data expected by mid-2025. Wall Street analysts think infigratinib also holds blockbuster sales potential.
What’s the bottom line? Despite the rumors, BridgeBio doesn’t have an obvious fit suitor-wise. Amgen might be in play, but separate commercialization deals for acoramidis and infigratinib seem like the path of least resistance in this case. Still, blockbuster drugs don’t fall off trees, and there are multiple companies with big holes to fill in their portfolios.
Cytokinetics
Cytokinetics is a clinical-stage biopharma company that specializes in developing drugs for cardiovascular and neuromuscular disorders. The biotech’s shares have rocketed higher by 148% in the past few weeks thanks to a positive late-stage readout for its heart drug aficamten.
Before this pivotal-trial readout, Cytokinetics was already rumored to be engaged in buyout discussions with two major pharmaceutical companies, according to a report by Bloomberg. To date, however, a deal has yet to materialize.
What’s the big deal? Wall Street analysts have pegged this breakthrough cardiovascular-disease drug as a potential $3 billion-a-year product. That’s an enormous commercial potential for a company with an $8.1 billion market cap at present. However, Cytokinetics, as a pre-commercial-stage company, probably won’t be able to maximize the drug’s sales alone. So a partnering deal or a buyout makes a lot of sense in this case.
Going one step further, Cytokinetics seems almost certain to be bought out. This therapeutic area has attracted a significant amount of attention from multiple drugmakers in recent years, and aficamten screens as a potential best-in-class therapy based on publicly available data.
My hunch (and it’s only a hunch) is that Cytokinetics gets taken out before the end of the first quarter of 2024 at a premium in the range of 62% to 86% based on similar deals in the not-so-distant past. But even if the buyout thesis falls through, this mid-cap biotech stock should still deliver strong organic returns for investors over the long term.
George Budwell has positions in Pfizer. The Motley Fool has positions in and recommends Bristol Myers Squibb, Cytokinetics, Merck, and Pfizer. The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.
