-- This article was written by Alicia McElhaney of The Deal
Biotech share prices are continuing to slide, and large pharmaceutical companies that are flush with cash are looking to take advantage of cheaper assets, analysts say. Among potential targets they cite are Relypsa (RLYP), Regulus Therapeutics (RGLS), and Intercept Pharmaceuticals (ICPT), while the analysts say possible buyers include Action Alerts PLUS holding Biogen (BIIB), Teva Pharmaceutical (TEVA), and Gilead Sciences (GILD).
"It's kind of logical that buyers would look more closely at potential acquisition targets after the sector took a hit," said analyst Liana Moussatos of Wedbush Securities in a phone interview.
Analyst Michael Yee of Morningstar agreed.
"What has driven an urgency [in the sector] is that asset prices have fallen over the past few months," Yee said in a phone interview.
He pointed to an uncertain political climate as one of many causes of the price drops.
Democratic presidential candidate Hillary Clinton's Sept. 21 tweet, a short quip on the biotech industry, sent investors running, causing the biotech index to drop. It hasn't quite recovered since.
The tweet read: "Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. -H"
"Given the fact that we're going into an election year, that's caused people to sell off some of these stocks," Yee said.
So who are the major players in this market ripe for M&A?
The most likely buyers are large pharmaceutical companies looking to purchase smaller, more strategic companies.
Yee pointed to AbbVie's (ABBV) planned purchase of cancer drug maker, Stemcentrx, and Abbott Laboratories' (ABT)'s planned acquisition of St. Jude Medical (STJ), both of which were announced last week, as evidence of significant movement in the sector.
However, Yee said, Medivation's (MDVN) outright denial of Sanofi (SNY)'s $9.3 billion bid, made last week as well, signifies a difference of opinion among potential targets and buyers.
"It says that the sellers perhaps still believe that the prices still aren't where they need to be," Yee said. "They're still in love with their 52-week highs."
According to Yee, Biogen is looking for new drugs.
Yee said Biogen has explicitly expressed interest in acquiring Acadia Pharmaceuticals (ACAD), a neurology drug maker that just received approval for its Parkinson's psychosis drug, Nuplazid.
According to analysts Joseph Schwartz and Brett Larson of Leerink Partners, Biogen's CFO said the company is willing to pay about two times EBITDA for acquisitions that are likely to be strategic buys.
Another potential buyer of Acadia is Teva Pharmaceutical, an Israeli drug company, according to Ken Cacciatore, analyst at Cowen & Co. He said in a note that Acadia could sell for as much as $6 billion, while analyst Charles Duncan of Piper Jaffray put the price target around $5 billion in an interview with The Deal.
Yee also noted that Gilead Sciences could be interested in an acquisition.
"While the company is comfortable with outright acquisitions, it is also actively considering licensing and collaboration arrangements," Schwartz and Larson said in a note.
As far as targets go, specialty pharmaceutical companies are seeing a fair amount of play.
"There's always an interest in rare diseases," Moussatos said. "Companies looking to expand might look for smaller rare disease companies."
Moussatos noted that Relypsa could be an easy takeover target for Sanofi, which already partners with the hyperkalemia drug company, would "fit in with Sanofi's marketing message."
According to Moussatos, Relypsa could sell for $52 per share, or $2.3 billion based on shares outstanding.
Moussatos also noted that Regulus, a drug company that focuses on a wide variety of diseases, could sell for around $48 per share, or $2.5 billion based on shares outstanding, and Intercept Pharmaceuticals, a drug company that focuses on liver drugs, could go for as much as $423 per share, or $10.3 billion.
Her colleague, Brian Nierengarten said in an interview with The Deal that Anacor Pharmaceuticals (ANAC) could be ripe for takeover because it only has one drug, Kerydin, which is used to treat toenail fungus, in its platform.
Nierengarten said at the other end of the spectrum -- companies ripe for takeover thanks to their research and development efforts -- are MacroGenics (MGNX) and Xencor (XNCR).
Anacor, Biogen, Gilead, MacroGenics, Regulus, Relypsa,Teva, and Xencor officials could not be reached for comment. Acadia declined comment.
-- This article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration. Click here for a free trial.