On Sunday, the world's largest independent biotechnology company, Amgen Inc. (Nasdaq: AMGN), bought Onyx Pharmaceuticals Inc. (Nasdaq: ONXX) in a $10.4 billion dollar deal - making it the fifth-largest biotech deal in history according to Standard & Poor's Capital IQ.
The Amgen deal with Onyx highlights where insiders - and investors - see the best investments in the biotech industry.
I'm talking about cancer therapy - a multibillion dollar industry that will be the biggest M&A driver - and profit producer - for biotech investors.
In fact, Citigroup analysts estimate that the cancer immunotherapy market will generate $35 billion per year over the next 10 years as existing drugs grow market share and new therapies enter the market.
That means profits for anyone who picks the best investments to play this trend...
Booming Market for Cancer Therapy Drugs
Around 25% of biotech industry deals greater than $100 million presently involve cancer - more than any other disease, according to JPMorgan Chase & Co.
It's no wonder why there are so many zeros behind that estimate...
The American Cancer Society projects 1,660,290 Americans will be newly diagnosed with cancer in 2013. Of that group, 580,350 are projected to die of the disease; that's 1,600 people per day.
The fact is cancer remains the second-most common cause of death in the United States, accounting for almost one in every four deaths per year. The demand for a new wave of cancer treatments is in full throttle.
The San Francisco-based biopharma specializes in developing therapies that target the molecular mechanisms that cause cancer.
Right now, it notably owns three anticancer treatments: Nexavar for liver and kidney cancer, Stivarga for colon cancer, and most famously Kyprolis, a last-ditch treatment of multiple myeloma (bone marrow cancer) that gained FDA approval last July.
Kyprolis has enjoyed $125 million in sales in the first six months of 2013. Analysts further project annual sales growing to $2 billion if the drug both gains approval overseas and can be used in earlier-stage treatments of the disease.
Meanwhile, Amgen's highest-grossing drugs are being threatened by new competition as their patents expire.
Enbrel, a rheumatoid arthritis treatment, grossed $1,075,249 in 2013 Q1 sales, but its patent expired in October 2012. The top-selling Neupogen and Neulasta franchise, which helps patients cope with the side effects of chemotherapy, facilitated $17.3 billion in Amgen revenue in 2012 alone. Both patents are due to expire in December.
Kyprolis is expected to buttress sales as its aging blockbusters prepare to face the open-market competition. Onyx should also help Amgen gain a higher profile in oncology, and its products play well with Amgen's existing cancer support medications.
"Amgen has a unique opportunity to add value to Kyprolis, a product which is at an early and promising stage of its launch," Robert A. Bradway, chief executive of Amgen, said in a statement Sunday.
Amgen will offer $125 per share in cash through a tender offer for Onyx's shares. The deal is expected to close at the beginning of the fourth quarter. For now, Onyx shares rose 5.58% to $123.49 and Amgen jumped 7.7% to $113.75.
And they aren't alone in delivering for shareholders - there are more of these best investments in the biotech M&A trend...
M&A Moves Create the New Best Biotech Investments
Large pharmaceutical companies have been seen increasingly looking to acquire smaller biotech firms to access new drugs and new patents, as they stand to experience significant revenue drops from expiring patents.
In fact, the volume of healthcare mergers and acquisitions went up 30% in the first half of 2013 when compared with the same period last year.
- In May, pharmaceutical giant Actavis Inc. (NYSE: ACT) acquired specialty biotech Warner Chilcott (Nasdaq: WCRX) for $8.5 billion.
- Celgene Corp. (Nasdaq: CELG) jumped into the blood cancer-drug arena last June by striking a licensing deal with MorphoSys AG (MPSYY). MorphoSys gets an up-front license fee of $92 million, and Celgene will purchase $60 million in new shares of the company.
- And on Aug. 19, Johnson & Johnson (NYSE: JNJ) completed its acquisition of Aragon Pharmaceuticals for $650 million up front, plus a potential $350 million in milestone bonuses. According to Johnson & Johnson, the deal was struck with the specific aim of strengthening Johnson's prostate cancer pipeline.
It's clear we're currently undergoing a "biotech buyout binge" driven by wealth-deflating patent expirations and a red hot cancer therapy industry.
Check out where the deal-making is driving up biotech stocks so that you can get ahead of the trend (and the crowd) to turn a profit. Money Morning Executive Editor William Patalon III shows you how in this special analysis for our Private Briefing investment service subscribers: How to Profit from Biotech Merger Mania
- Money Morning:
A Guide to Pricing and Investing in Tech IPOs
- Money Morning:
Why the Best Investments in Tech Right Now Stem from This Industry
- American Cancer Society:
Cancer Facts & Figures 2013