Incyte Corporation (NASDAQ:INCY)’s pipeline isn’t too complicated with numerous pharmaceutical pacts, either. Aside from a licensing deal with Eli Lilly & Co. (NYSE:LLY) over baricitinib, which is currently being studied in three trials (rheumatoid arthritis, psoriasis, and diabetic nephropathy), every other pipeline hopeful is either owned by Incyte Corporation (NASDAQ:INCY), or licensed in some full or partial form to Novartis. With peak sales of Jakafi expected to be about $1 billion, and taking into account the potential of its remaining pipeline, as well as sales that would be taken by Eli Lilly & Co. (NYSE:LLY) via baricitinib, I could see Incyte Corporation (NASDAQ:INCY) command a $5.5 billion to $6 billion price point.
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) — current market cap, $9.24 billion.
I would certainly quantify BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) as much less likely a purchase than Incyte, but I wouldn’t rule out its allure to Novartis, which is struggling to find ways to replace Diovan and Femara’s rapidly tapering revenue.
The hesitation I could see Novartis AG (ADR) (NYSE:NVS) having in purchasing a company like BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is twofold. First, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)’s area of focus is on ultra-rare diseases, and its treatments often focus on some form of enzyme-replacement therapy. Novartis’ focus tends to be on solid tumor and blood-borne cancers, with only a very minimal focus on rare diseases, so this would be quite the step out of its normal comfort zone. Second, BioMarin’s valuation is already pretty steep, at $9.24 billion.
Despite these concerns, I still feel there is hope a deal here could get done. What BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) would bring to Novartis are four currently approved ultra-orphan treatments (three in the U.S. and one in the EU) that have absolutely no competition and hefty annual price tags that insurance companies seem more than willing to pay. This would give Novartis some cushion when its next round of big patent expirations rolls around in a few more years. Because investors have already priced BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) so loftily because of its unique position in the diseases it treats, I could see a deal getting done with little upside from here — perhaps $10 billion to $10.5 billion.
The article 2 Biotech Stocks That Could Be on Novartis’ Buyout Radar originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool recommends BioMarin Pharmaceutical.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
