Trump presidency could prove a salve for pharma merger deals

Fri Nov 11, 2016 1:03am EST
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By Carl O'Donnell

NEW YORK (Reuters) - Biotechnology companies, whose U.S. shares soared Wednesday after Republican Donald Trump's presidential election, may soon see another benefit: an uptick in biotech M&A.

A potential influx of foreign cash and improved stock valuations under the Trump administration would likely boost dealmaking in the industry, which has been anemic ever since political rhetoric against high drug prices picked up late last year, industry analysts and investment bankers said.

That could mean renewed interest in some prime targets of takeover speculation, from cancer drug specialists like Tesaro Inc (TSRO.O: Quote) to rare diseases firms like Sarepta Therapeutics Inc (SRPT.O: Quote), according to several healthcare investors interviewed by Reuters.

It could also throw a lifeline to smaller biotech firms, which on average have only 11 months of cash left to finance their research, according to Thomson Reuters data, and have been hesitant to try to raise money during a weak equities market.

Despite a few headline-grabbing deals, such as Pfizer Inc's (PFE.N: Quote) $14 billion acquisition of cancer drugmaker Medivation Inc in August, overall life sciences dealmaking is down 65 percent from the same period last year, according to Thomson Reuters data.

Indeed, the biggest mergers and acquisitions news this year was Pfizer's failed bid to buy Allergan Inc (AGN.N: Quote) for $160 billion, which was shot down by U.S. regulators in April.

Investment bankers attribute the slowdown to weak biotech stock prices, which have traded down as much as 30 percent after Democratic presidential candidate Hillary Clinton vowed to act against pharmaceutical "price gouging" late last year.

Sector stocks are still valued more than 25 percent below their 2015 peak, and potential acquisition targets have stood firm against suitors who tried to take advantage of the drop.   Continued...

U.S. President-elect Donald Trump (2ndR) answers questions as his wife Melania Trump and Senate Majority Leader Mitch McConnell (R-KY) watch on Capitol Hill in Washington, U.S., November 10, 2016. REUTERS/Joshua Roberts