The healthcare sector has been a serious disappointment for investors in 2021. After a record year in 2020 thanks to the advent of several high-profit COVID-19 vaccines and therapies, the SPDR S&P Biotech ETF (NYSEMKT: XBI) has now fallen 11.5% so far this year. The SPDR S&P Biotech ETF, on the other hand, gained a whopping 48% in 2020. Even more impressive, this diverse biotech ETF was on a nearly decade-long bull run, where it rose 570%, before doubling. of this year. – withdrawal figure.
There are a host of reasons behind this significant downward trend in health care stocks this year. The United States Food and Drug Administration (FDA) issued more than a few full response letters (i.e., rejections) in 2021, some of which were surprising To say the least. A healthy framework of new technologies making the headlines of biotechnology pioneers such as Allogenic therapy, Bluebird Bio, CRISPR Therapeutics (NASDAQ: CRSP), Therapeutic Zarephath, among many others, have failed be up to expectations and / or exposed disturbing safety signs. Some newly approved drugs, such as Biogen‘s (NASDAQ: BIIB) Aduhelm, the Alzheimer’s disease drug, has significantly underperformed Wall Street selling expectations so far. And last but not least, a good number of high value investors are likely to be turning a profit following the huge recovery in the industry in 2020.
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Buyouts maintained investor engagement in healthcare in 2021
The saving grace of the healthcare industry in recent months has been the penchant of blue chip pharmaceutical and biotech companies to mergers and acquisitions to drive growth. While 2021 has been a somewhat negative year on the M&A side of the equation, there have still been a number of large-scale business development deals in the industry. Pfizer (NYSE: PFE), flush with the money for his COVID-19 vaccine, released a cancer specialist Therapeutic Trillium (NASDAQ: TRIL). French pharma titan Sanofi (NYSE: SNY) has been very busy on the M&A front this year, with both deals Translate biographies mRNA pipeline and Kadmon Holdings‘Rezurock, a recently approved chronic graft-versus-host disease drug. And Merck, for its part, recently bought Acceleron Pharma for its blood cancer and possible pulmonary arterial hypertension franchises.
While healthcare business development deals are almost impossible to predict, they can be huge generators of wealth for shareholders. After all, there have been quite a few buyout deals in the industry over the past decade that have resulted in premiums above 100%. While valuable drugs or a strong competitive position won’t necessarily bring a suitor to the table, these key characteristics are usually the main reason why deals are made in healthcare. With that in mind, here are two healthcare companies that may soon appeal to one or more suitors.
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Adaptimmune: a solid tumor cell therapy game
Adaptimmune is a strange bird, to say the least. Despite strong clinical trial results for its genetically engineered T cell therapies for solid tumors, biotechnology has a market capitalization of $ 831 million. In addition, Adaptimmune may just be a in some months filing its first regulatory application for afamitresgene autoleucel, or afami-cel for short, as a breakthrough treatment for a form of soft tissue cancer known as synovial sarcoma.
To top it off, the biotech has entered into clinical collaboration and licensing agreements with pharmaceutical industry heavyweights such as Astellas Pharma, GlaxoSmithKline, and more recently rock. Finally, Adaptimmune has started working on the holy grail of T cell therapies known as standard therapies, which can be made much simpler than the current generation of cell cancer therapies.
Why is biotechnology so unloved on Wall Street? Two reasons. First and foremost, biotechnology as an industry has lost some of its luster as an investment vehicle this year. The money that was pouring into the industry now appears to be going into other high growth areas such as cryptocurrency. Second, industry experts are apparently not convinced that T cell therapies will work in a solid tumor setting – despite data from Adaptimmune’s early clinical trials suggesting otherwise.
Where is this story going? Adaptimmune shares are likely to slowly climb to the top of afami-cel display over the next year. If the data warrants a regulatory filing, there’s a good chance one of the big pharmaceutical companies will make a take-over bid. Adaptimmune’s platform is unique, full of high-value clinical candidates, and it can probably be obtained for less than $ 3 billion.
Which pharmaceutical company could be the perfect contender? My hunch is that Pfizer will be the buyer. Roche could of course step in, especially after signing an agreement to develop standard therapies with the company. But Pfizer has both the financial firepower to secure a deal and a dire need to strengthen its presence in cancer cell therapy.
CRISPR Therapeutics: all about the price
CRISPR Therapeutics would probably have been bought out some time ago if its share price had not gone parabolic earlier this year. CRISPR works with the biotechnology giant Vertex Pharmaceutical (NASDAQ: VRTX) on a therapy called CTX001 for the treatment of transfusion-dependent beta-thalassemia and sickle cell anemia. Vertex also owns a equity participation in the gene editing company. If CTX001 is successful in the clinic, this unique rare disease therapy could easily show successful sales numbers.
But that’s not what’s impressive with CRISPR. The company also has clinical candidates for various forms of cancer, regenerative medicine, and a host of rare diseases such as Duchenne muscular dystrophy, a disorder of muscular atrophy. Now the company has released disappointing first results for its first blood cancer candidate CTX110 blood cancer candidate earlier this week. But CRISPR management believes that additional doses of the therapy should improve its durability, and therefore its appeal as a true needle-displacement therapy for large B-cell lymphoma. A pivotal trial of this therapy could start as soon as possible. ‘next year.
Who is the potential suitor? Like Adaptimmune, CRISPR is expected to see several companies knocking on its door in 2022. Vertex is the obvious choice, via its collaboration on rare blood diseases. Corn Gilead Sciences (NASDAQ: GILD) has shown a keen interest in oncology over the past half-decade, and he has the money to close the deal. Moderna (NASDAQ: mRNA) could be at stake as well. Moderna has a penchant for cutting edge technology, she is full of money, and she is in desperate need of another source of income aside from her COVID-19 vaccine to justify her assessment.
What’s the big picture? A deal for CRISPR probably comes down to price. Even if the company’s market capitalization is less than $ 8 billion, management may want a number between $ 20 billion and $ 30 billion. CRISPR is a new drug development platform that can be applied in multiple ways to a variety of genetic diseases. As such, it would be financially irresponsible to sell biotechnology for less than a monstrous premium. In fact, this possible buyout could be the biggest deal in the entire industry next year.
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Georges budwell has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool recommends Biogen, Bluebird Bio, Gilead Sciences and Moderna Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.