A big deal, but a safe bet. That's one way to characterize Roche's bid to acquire Genentech. Even with the hefty price tag—and
putting company culture aside—the move to lock up Genentech's powerful portfolio of oncology drugs makes a lot of sense. It's
part of a growing trend that some industry watchers have characterized as a safer, more cautious approach to deal-making.
It's not that companies aren't willing to shell out the cash (they have the balance sheets to do it), they just want to make
sure they don't get burned.
"You see Big Pharma becoming more risk averse," says Robert Esposito, partner in KPMG's pharmaceutical transaction services.
"They're incredibly disciplined right now because none of the big companies want to be known for entering into a transaction
they can't justify to their shareholders, their board, or Wall Street."
Of course, that caution hasn't stunted deal-making—in fact, the weak dollar points to a growing pool of potential acquirers
and more deals in the year to come. But pharmas aren't seeking any ol' deal—they're looking for the next "it" drug, and careful
scouting has placed a premium on an elite set of companies with promising late-stage products. "It's a little bit like musical
chairs," says Steven Burrill, CEO of Burrill & Company. "There's a limited set of opportunities, and everybody's scrambling
to grab what they can."
In terms of takeovers—and Pfizer, in particular, needs one to replace Lipitor—the "catch of the county" continues to be Bristol-Myers
Squibb (now even more attractive with full control of Erbitux) while Amgen remains an comely second choice. "Those companies
would put Pfizer in a strong position from the perspective of both oncology and biologics, which is a major part of their
long term goals," says Barbara Ryan, Deutsche Bank's Big Pharma analyst.
Aside from those prospects, most companies are looking for acquisitions with market caps in the range of $500 million to $1
billion. Here, we set out six promising companies that are indicative of the larger M&A trends, and are ripe for acquisition.
The acquisition is probable, but Bayer plays the waiting game to ensure it's profitable
In the last days of July, Onyx and its partner Bayer got word that their joint project Nexavar (sorafenib) was approved to
treat liver cancer in China. For Onyx, it was a rock-star moment. After all, the company was one of the few biotechs to discover,
develop, and market its own drug, forming a true partnership with Bayer. And now, with the new approval, the two partners
enter the world's most lucrative market for their drug.
Liver Cancer: Underserved Disease
Nexavar is an anti-angiogenesis drug like Avastin (bevacizumab), but it inhibits several cancer growth mechanisms and comes
in a pill. It has received approval in more than 70 countries to treat kidney cancer, and in more than 40 countries for liver
cancer. Sutent (sunitinib), Avastin, and Torisel (temsirolimus) have all entered the kidney cancer market, but Nexavar is
the only approved drug specifically for liver cancer.
China is the key market for liver cancer. Whereas the US has just 15,000 patients, China has half of the world's—nearly 350,000
new cases each year.