Biotech Mergers and Acquisitions Could See Significant Rebound

The number and value of M&A transactions fell sharply in 2016 from the prior year, disappointing investors and contributing to biotech’s under performance. The expectation for a significant rebound in deals for 2017 is very high, driven by a.) a consensus view that the largest pharma and biotech companies must acquire new products to fuel growth; b.) management teams expressing desire to do deals; c.) lots of cash on balance sheets; and d.) expectations for pro-growth and tax reform policies from President Trump.

By a wide margin, an uptick in M&A is seen by investors and analysts as the most important tailwind for biotech stock outperformance in 2017.

One company that we believe is shaping up to be an enticing acquisition candidate is, Propanc Health Group Corporation (PPCH). The company recently announced commencement of the in-life phase of the GLP-compliant, 28-day repeat-dose toxicity study for its lead product, PRP. PRP is a solution for once daily intravenous administration of pancreatic proenzymes trypsinogen and chymotrypsinogen.

Studies of this type are an important part of the development process for new therapeutic agents prior to clinical testing in humans and the study was discussed in detail at a recent scientific advice meeting with the Medicines and Healthcare Products Regulatory Agency (MHRA), UK, held earlier this year. Results from this study will help to provide a rationale to select a safe starting dose for first-in-man studies expected to commence in 2017.

In addition to the commencement of the GLP-compliant toxicity study, Propanc continues to work with its manufacturing partner, AmatsiQBiologicals, in Gent, Belgium, as it commences the detailed and technical process of preparing a suitable quality finished product for clinical trials. Activities include purification and characterization of the two pancreatic proenzymes, development and validation of analytical methods for quality assurance and stability testing of the final I.V. finished product formulation for PRP.

This study is a step closer to viability, which is a step closer to a major pay day for PPCH investors.

A few other interesting biotech stories include:

ImmunoGen, Inc. (IMGN), a clinical-stage biotechnology company focused on finding cures for cancer with its proprietary antibody-drug conjugate platform ended the week and year on a high note.  Unfortunately, the reason for ImmunoGen’s surge higher remains a bit of a mystery.  This is something to monitor heading into January.

Teligent (TLGT) specializes in generic drug manufacturing, but with a twist. Instead of making copycat versions of top-selling small-molecule drugs, Teligent focuses exclusively on products from the topical, injectable, complex, and ophthalmic markets (think creams, lotions, and ointments). With each passing year, a number of new drugs in these categories lose patent protection, allowing Teligent to make a generic, send it in for FDA approval, and grab market share by selling it at a discount.

The strategy has worked brilliantly. Teligent’s sales have been rising rapidly over the last few years, taking shareholders on a profitable ride. The company’s margins are also on the rise, which has allowed the company to finally become profitable. The odds look good that strong growth will continue from here, too. Teligent currently boasts 34 new products that are pending FDA approval, which management believes represent an addressable market opportunity of $1.6 billion. That’s a massive opportunity for a company that’s only expected to ring up $67 million in total sales this year.

Sage Therapeutics, Inc. (SAGE) a clinical-stage biopharmaceutical company developing novel medicines to treat life-altering central nervous system (CNS) disorders, will be participating in a fireside chat at the Goldman Sachs Healthcare CEOs Unscripted conference on Thursday, January 5th, in Boston, MA.  CEO Jeff Jonas, M.D., will represent the company. 

Cymabay Therapeutics, Inc. (CBAY) a clinical-stage biopharmaceutical company developing therapies to treat specialty and orphan diseases with high unmet medical need, today announced that it has entered into an exclusive license agreement with Kowa Pharmaceuticals America, Inc. for the development and commercialization of arhalofenate in the United States (U.S.).

Under the terms of the agreement, CymaBay will receive up to $15 million in upfront and near-term milestone payments and is eligible to receive up to an additional $190 million in payments based upon the achievement of specific development, regulatory and sales milestones.

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