(This column originally appeared at 11 a.m. ET on Real Money Pro, our premium site for active traders and Wall Street professionals. Click here to get great columns like this even earlier in the trading day.)
Johnson & Johnson (JNJ) finally wrapped up its months-long pursuit of Europe's largest biotech concern this week. It will buy Actelion for some $30 billion using cash "stranded" in its overseas operations. It is the largest M&A deal so far across the biotech industry this year. Two more buyouts with significant premiums have occurred in the $5 billion to $10 billion range so far in January, as M&A activity in this space is off to a good start after a relatively punk year in 2016.
So, who is the next buyout target in Biotech Land? Here are three on my list.
I still think Acadia Pharmaceuticals (ACAD) will not be a standalone entity by the end of the year. The Baker Bros. own over 20% of this mid-cap concern and are known for selling out to larger players. Its new drug, Nuplazid, is the first drug approved for the psychosis that occurs in 40% of the Parkinson's population and is in late stage testing for treating the same symptoms found commonly in Alzheimer's patients and the Schizophrenic populations.
The rollout is off to a good start and Parkinson's is probably a $1 billion indication by itself. I have already heard several anecdotal stories about the compound being prescribed "off label". It should be interesting to get some color on this when the company next reports quarterly results. Several large drug concerns have been rumored to be interested in the company including Pfizer (PFE) .
Synergy Pharmaceuticals (SGYP) also makes the list. Its first drug, Trulance, was just approved by the FDA for the treatment of chronic idiopathic constipation. The company will file to add an indication to treat IBS-C soon, based on Phase III results. The new compound shows clear advantages over market-leading Linzess. The company has not announced a secondary offering as of yet. If it doesn't disclose one over the next week or two, this could be a sign that Synergy already might be in negotiations. Takeda (TKPYY) is just one of many firms looking to expand their footprint in the GI space and that make logical suitors.
Finally, we have mid-cap oncology concern Exelixis (EXEL) , which has taken its shareholders on a massive rally over the past nine months or so. Its key asset is Cabometrix, which was approved for certain types of advanced renal cell carcinoma late in the first half of 2016. The drug is already taking significant market share and did over $30 million in revenue in the last reported quarter. It is also likely the label for Cabometrix expands to other indications.
Exelixis, although the stock has basically quadrupled since May, still could find itself a target. The oncology space is hot for M&A and there are few mid-cap concerns in the sector. Fellow oncology mid-cap Ariad Pharmaceuticals (ARIA) was bought out by Takeda for a 75% premium just a few weeks ago. This is another name that could have multiple interested suitors among the pharma and biotech giants.
And those are some names on my buyout list, as M&A picks up across the biotech sector early in 2017.