December 27, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Wilmington, Del.-based Incyte Corporation is often cited as a hot acquisition target. In a recent Evercore ISI survey, 244 biotech industry observers listed it as their top target. Keith Speights, writing for The Motley Fool, takes a look at the three most likely buyers in 2017.
1. Gilead
Gilead tends to be at the top of everybody’s list. Partly because most investors and analysts really want Gilead to buy something to make up for its faltering hepatitis C sales. And Gilead itself has indicated it wants to strengthen its oncology portfolio. And Incyte’s Jakafi is a big mover in the oncology market, approved for myelofibrosis and polycythemia vera, and may soon be approved for graft-versus-host disease.
Speights isn’t convinced that this will happen. He writes, “Incyte’s current market cap stands north of $19 billion. The stock trades at over 70 times forward earnings. To buy Incyte, Gilead would have to pay more than that—perhaps much more. I suspect Millegan (company chief executive officer) has seen plenty of spreadsheets chock-full of details on a potential Incyte acquisition and come away skeptical.
Eli Lilly & Co. and Incyte have been collaborating since 2009, and Lilly expects to launch baricitinib for rheumatoid arthritis in early 2017. Lilly has a decent oncology portfolio that includes Alimta, Erbitux, and Cyramza, and Jakafi would fit in well. Again, price maybe the issue.
Speights writes, “Lilly doesn’t have nearly as much cash as Gilead. To buy Incyte, Lilly would have to increase its debt significantly. I’m not sure that the company would choose that route.”
3. Novartis
Incyte and Novartis have also been partnered since 2009, and Novartis markets Jakafi outside the U.S. as Jakavi. And since a potential deal between Novartis and AstraZeneca never emerged as rumored, it’s possible that Novartis might be looking for a bigger deal than the company usually invests in. Speights writes, “Incyte could be the right size. Although Novartis’ cash position is only around $7.8 billion, the company could raise perhaps $14 billion more by selling its stake in Roche .”
That said, he suspects it won’t happen. Novartis just bought two smaller, private companies, Encore Vision and Ziarco Group Limited, and in November bought Selexys Pharmaceuticals for $665 million. These are all more consistent with Novartis’ smaller bolt-on acquisitions.
But maybe Incyte will buy somebody. Just last week, Incyte inked a collaboration deal with Netherlands-based Merus NV to develop bispecific antibodies for the immuno-oncology market.
And Incyte has a stake in a small biotech, Agenus . Speights writes, “Incyte could certainly afford to buy Agenus if it wanted to do so. Agenus’ current market cap is roughly $380 million. Incyte reported a cash stockpile (including cash, cash equivalents, and marketable securities) of $716.6 million at the end of September.”
But he doubts whether that will happen, either. In fact, Speights suspects there won’t be an Incyte deal in 2017. But who knows? Certainly a lot of companies have taken a look at Incyte. Maybe everyone will be surprised.
