Tag: M&A

Biotech M&A is Finally Rewarding Patient Investors

Posted on by phoffman@channelchek.com

The Acceleration of Biotech Acquisitions, Why it Should Continue

The pace of mergers and acquisitions (M&A) in the biotech sector has accelerated in 2023 compared to 2022 and 2021. The factors driving this increase are numerous, and there is increasing urgency on both sides, the acquirers and acquirees to find a fit. This is playing out with deal value up significantly in 2023, with noticeable acceleration as the year has progressed. During the first quarter, investors in at least eight biotech companies found themselves in enviable positions. Below is a recap of what has already happened and the perceived trend. If it continues, it could lead to 2023 seeing far more biotech deals than the previous two.

According to data from William Blair’s quarterly biopharma review, the total deal volume in the sector was elevated, although far below record highs. Total M&A value for the first quarter was $52 billion versus $88 billion for all of 2022, and $77 billion in 2021. The report shows the average deal was $630 million (versus $367 million in 2022). The upfront cash and equity has doubled from the prior year at $508 million (versus $249 million in 2022).

Later stage companies seem to be what pharmaceutical firms have the most appetite for. The phase of development of the companies most sought was Phase II or later with 100% or all of the public acquisitions in this stage. Five of the eight were in the commercial stage.  

Source: The Quarterly Rx: Q1 2023 U.S. Biopharma Recap (William Blair)

The details above are of the eight public companies that merged or were acquired during the first quarter. However, just this week alone, there have been three more biotech acquisitions announced:

  • On May 16, 2023, Merck & Co. announced that it would acquire Acceleron Pharma for $11.5 billion. Acceleron is a clinical-stage biopharmaceutical company, the acquisition will give Merck access to Acceleron’s lead drug candidate, luspatercept, which is currently in Phase 3 clinical trials for the treatment of anemia associated with chronic kidney disease.
  • On May 17, 2023, Gilead Sciences announced that it would acquire Immunomedics for $21 billion. Immunomedics is a clinical-stage biopharmaceutical company the acquisition will give Gilead access to Immunomedics’ lead drug candidate, Trodelvy, which is currently in Phase 3 clinical trials for the treatment of triple-negative breast cancer.
  • On May 18, 2023, AstraZeneca announced that it would acquire Daiichi Sankyo’s oncology business for $6.9 billion. Daiichi Sankyo’s oncology business includes a portfolio of marketed and late-stage cancer drugs. The acquisition will give AstraZeneca a broader portfolio of cancer drugs and will help the company to expand its presence in the oncology market.

What is Driving the Acceleration?

There are a number of “not-so-secret” factors that are helping the acceleration of M&A activity in the biotech sector. One factor is the increasing cost of product development. The average cost of developing a new drug has increased from $1 billion to $2.6 billion in the past decade. This has made it increasingly difficult for small and mid-sized biotech companies to develop viable candidates independent of big-pharma’s help. As a result, small companies are increasingly looking to merge, partner or be acquired by larger companies with deeper pockets.

Another factor driving the acceleration of M&A activity in the biotech sector is the increasing focus on innovation. Large pharmaceutical companies don’t have the talent that exists in the universe of small biotech companies. So they are increasingly looking to acquire companies with innovative technologies. These innovations can help them provide new drugs that can compete with the blockbuster drugs coming off patent in the next few years.

Finally, the acceleration of M&A activity in the biotech sector is also being driven by the increasing consolidation of the industry. In recent years, a number of large pharmaceutical companies have merged with or acquired each other. This has led to a smaller number of bigger companies that are now dominant in the industry. These companies are increasingly looking to acquire smaller companies in order to expand their product portfolios and overall reach.

Take Away

While deals in many industries, both public and private, have decelerated to a crawl, the cash-rich pharmaceutical industry giants are tactically looking to build their portfolios of next-generation treatments. And many biotech companies are in need of a lifeline to get their pipeline products the research dollars they deserve. This dynamic has accelerated public and private deals in the industry in 2023.  

The acceleration of M&A activity in the biotech sector is a trend that is not expected to end soon. This is because the factors that are driving deals are likely to remain in place. Investors looking to explore smaller biotech companies may want to keep in mind the nuances of the average company attributes that found deals in the first quarter. Top-tier research on a number of smaller companies, provided by the sectors equity analysts at Noble Capital Markets can be found here.    Company information and data on many other biotech and life sciences companies can be discovered by going to this link.

Paul Hoffman

Managing Editor, Channelchek

Sources

file:///C:/Users/prese/Downloads/WilliamBlair-Biopharma-Quarterly-Review-Q1-2023.pdf

https://community.ionanalytics.com/ma-highlights-1q23?account_created=1

https://dkf1ato8y5dsg.cloudfront.net/uploads/79/598/mahighlights1q23-final.pdf

Newcrest Mining Just Agreed to Be Acquired by Newmont, Who’s Next?

Posted on by phoffman@channelchek.com

Is Further Consolidation in the Mining Sector Expected?

Two of the world’s leading gold producers have agreed to merge. In a press release this week, Newmont Mining (NEM) said it entered into a definitive agreement to acquire 100% of shares of Newcrest Mining (NCMGY). The deal represents a 30.4% premium to Newcrest stockholders above the price when Newmont first made an offer in February. While this is a huge deal that will greatly expand the world’s largest gold-producing company, investors are seeing possible opportunities in smaller mining companies. It’s likely some are quietly being targeted in 2023 for a number of important reasons. Investors interested in this industry may want to familiarize themselves with the current dynamics.

About the Newmont Newcrest Deal

Newmont, the world’s largest gold producer, is solidly moving toward becoming much larger after the board of takeover target Newcrest Mining unanimously agreed to recommend the merger bid to shareholders. Newmont projections indicate the combined entity could create annual production of 8Moz of gold and 155k tonnes of copper.

The merged company would easily control world-leading gold stocks. Newmont is also set to become a significant copper producer, with current and expected developments to provide significant production upside in the coming years, including the world-class Wafi-Golpu copper-gold project in Papua New Guinea.

Takeover Details

After rejecting Newmont’s initial February 2023 offer, the Newcrest board today elected to accept the significantly upgraded April revised proposal. The deal carries an implied equity value of US$26.2 billion and enterprise value for Newcrest of US$28.8 billion.

Current Newcrest shareholders will have 31% ownership of the combined group.

According to Newcrest’s chairman, Peter Tomsett, the transaction will combine two of the world’s leading gold producers, bringing forward significant value to Newcrest shareholders through the recognition of the company growth pipeline.

Will the Merger Trend Continue?

Higher metals prices and increased demand brought on by changing energy production and storage, post-pandemic demand, and commodities investing in an uncertain global economy have caused a number of deals in this sector already this year.  

The primary reasons to expect more consolidation within the mining sector are growing.  

The chart above created by the CRU Group shows how fragmented gold mining is relative to other metals. The top 10 largest gold miners only produce 28% of all output. Gold prices have been rising fairly steadily but spending on exploration has been stalled. Growth to create shareholder value, would most efficiently and expediently be achieved by merger and acquisition (M&A). In the current environment, buyouts of active producers with known reserves are the alternative way for larger miners to to increase their production share, replenish depleting gold reserves and… lower production costs through with far less risk and in a shorter time period.  

More Reasons to Own Mining Companies

World demand has been heightened for gold, copper, and other minerals used to store or distribute electricity. This dynamic which has been trending upward in recent years, is likely to push other financially strong mining companies, that want to satisfy new production demand now rather than through exploration and long, uncertain bureaucratic approval processes will shop for producers to increase production and grow to serve shareholders. Smaller companies that find themselves the target of an acquisition, also have a duty to serve shareholders. Often this plays out by the target company negotiating terms that are similar to the 30% gain seen in the Newmont/Newcrest deal.

What Else

Informed stock selection is key to discovering and deciding whether to invest in companies best positioned to benefit from a sector experiencing growing demand where acquisitions, in full or in part, fulfill larger company goals.

Where does an investor start to better understanding the mining sector and individual companies? Earlier this year The Channelchek Take Away Series brought to viewers a live in-depth presentation of 12 mining companies that were just coming off the huge PDAC mining conference in Canada. These presentations are available on video to be replayed – they may be the best place to begin hearing from mining company executives and a highly respected senior natural resources analyst. Click here to get started. Then visit Channelchek’s Natural Resources data of the many other companies available to discover for even more interesting, actionable opportunities.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.newmont.com/investors/news-release/news-details/2023/Newmont-Enters-into-Definitive-Agreement-to-Acquire-Newcrest/default.aspx

https://im-mining.com/category/mining-mergers-and-acquisitions/

https://www.crugroup.com/knowledge-and-insights/insights/2023/gold-sector-consolidation-has-a-long-way-to-go/

Biotech Announcement Sends Stock Up 258%

Posted on by phoffman@channelchek.com
Image Credit: Bradley Johnson (Flickr)

The Power of Small Companies Highlighted in Today’s Biopharma Announcements

Business headlines surrounding Silicon Valley Bank and its customers may take some time to fade from the front page. In the meantime, looking past them, there are some positive news and developments. Two news items involve announcements by biotech/pharmaceutical companies this week. One is a deal you don’t have to dig too deep to find, Pfizer (PFE), the pharmaceutical behemoth, is looking to acquire Seagen (SGEN) for $43 billion. The second is a smaller deal and has been crowded off many newsfeeds. Provention Bio (PRVB) is expected to be purchased by Sanofi (SNY) a large French-based pharmaceutical company.

Seagen shares increased 17% in the first hour of trading after the Pfizer announcement, shares of Provention were up 258% the same morning after the Sanofi announcement. Below is a chart of the month-to-date performance of the two that are to be acquired.

Source: Koyfin

The Power of Flying Below the Radar

Seagen is a borderline household name and has been a known acquisition target for some time. Just last July, Merck offered 40 billion for the company, this known interest in the company has kept the price elevated. Shifting the focus on the power of smaller, less talked about companies, they often have more potential for larger gains because they are less known. And while the numbers ($43 billion vs $2.9 billion) don’t make for compelling headlines, the numbers in the graph above demonstrate the impact can be far more compelling to investors.

The Provention Bio Deal

Sanofi and Provention Bio, a U.S.-based, publicly traded biopharmaceutical company focused on preventing autoimmune diseases, including type 1 diabetes (T1D), entered into an agreement for Sanofi to acquire Provention Bio, Inc., for $25.00 per share in cash.

Under the terms of the agreement, Sanofi will begin a cash tender offer to acquire all outstanding shares of Provention Bio.

The actual completion of the tender is subject to standard conditions, including the tendering of a number of shares of Provention Bio, Inc. common stock that, together with shares already owned by Sanofi or its affiliates, represents at least a majority of the outstanding shares of Provention Bio, Inc. common stock.

If the tender offer is successfully completed, then a wholly owned subsidiary of Sanofi will merge with and into Provention Bio, Inc., and all of the outstanding Provention shares that are not tendered in the offer will be converted into the right to receive the same $25.00 per share in cash offered to Provention Bio, Inc. shareholders as part of the offer. Sanofi plans to fund the transaction with available cash. Subject to the satisfaction or waiver of customary closing conditions, Sanofi expects to complete the acquisition in the second quarter of 2023.

Worth Noting

The largest pharmaceutical companies developed huge cash “war chests” during the pandemic era. While they are prudent and tactical when deciding to grow through acquisition, the earnings on much of their cash stockpiles relative to inflation may be erosive to the pool’s purchasing power. Additionally, many small pharmaceutical and biotech companies that are developing tomorrow’s next wonder drugs are short the cash they need to drive their R&D to the finish line, and then to market. It’s presumed these companies are quietly being reviewed for a possible fit by big pharma. Big pharma’s current patents are also being eroded by time as each day they approach patent expiration. This is added incentive for these large companies to be actively looking for future merger and acquisition targets.

Smaller companies, for their part want their progress and potential more known. It is only through being known, and the more broadly the better, that investors of all types understand the work they do and the potential along with the risk they hold. These companies often hire the service of impartial, highly credible equity analysts to provide details of the pipeline and the successes and challenges of the company. This company-sponsored research provides investors with a third-party window into the company. The window is, at times, as basic as the idea that investors need to know enough about the existence of a small company to want to own shares. Greater investor interest typically increases liquidity which could help the company continue moving forward and developing its products.

Channelchek houses quality company-sponsored research. For Life Sciences company-sponsored research covered by FINRA licensed Sr. Analyst Robert LeBoyer visit this link. For Healthcare Services Sr. Analyst Gregory Aurand visit this link.

Paul Hoffman

Managing Editor, Channelchek