It's always a safe bet that biotech's biggest players will be actively seeking mergers and other deals in any given year. Yet analysts tell Bloomberg that 2012 might be one in which heavy hitters like Amgen ($AMGN) and Celgene ($CELG) take their deal-making games to another level to boost growth. Next week's must-attend J.P. Morgan Healthcare Conference in San Francisco offers an enticing venue for biotechs to target potential deals in 2012, and Gilead Sciences' ($GILD) nearly $11 billion buyout of clinical-stage drug developer Pharmasset ($VRUS) announced in late November has been an upbeat omen for deals to come this year.
At Amgen, the world's largest biotech, there are a number of factors that could push the company to pull the trigger on acquisitions this year. For starters, the Thousand Oaks, CA-based company has struggled to impress investors over the past 5 years, during which time its stock fell 6% while the Nasdaq Biotechnology Index rose 36%, Bloomberg reported. Amgen has also avoided big mergers during this stretch of stagnant growth, buying companies that cost less than $1 billion, and large biotechs could be in the market this year for buyouts in the $3 billion to $10 billion price range, Henry Gosebruch, managing director of healthcare M&As at J.P. Morgan, told the news service.
Amgen, of course, is also making a major leadership change this year, when CEO Kevin Sharer hands over the top job at the company to the company's chief operating officer, Robert Bradway. Investors will likely look to Bradway to turn the ship toward strong growth. And he'll have Amgen's war chest of cash at his disposal to make deals happen.
"Amgen needs to go on an aggressive business development spree to in-license and partner high-impact new drugs in Phase 2 so they can have Phase 3 read-outs over the next three to five years," RBC Capital Markets analyst Michael Yee told Bloomberg, noting that the company had $17.7 billion in cash and short-term investments as of Sept. 30, according to data compiled by Bloomberg.
Celgene has also trailed the biotech stock index in recent years, and the company has taken what could be called a conservative approach on buyouts, given that, as Bloomberg reports, the drugmaker has completed 8 equity or partnership deals over the past 5 years. Still, many biotechs—especially those working in Celgene's key areas of hematology and oncology—will likely want to get into talks with the drugmaker, which has a track record of seeking deals for assets in late-stage development as well as early-stage deals with companies such as Agios Pharmaceuticals.
- get more in the Bloomberg article
Special Report: Celgene - Biotech's Biggest Spenders 2011