Biotech stock swoon sparks buyout interest: investor

Wed May 4, 2016 10:47am EDT
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By Lewis Krauskopf

NEW YORK (Reuters) - A brutal start to the year for biotech stocks could pave the way for more deal-making in the sector, with premiums of potentially 50 percent to 100 percent above depressed share prices, according to a top healthcare investor.

The Nasdaq Biotechnology index .NBI fell 23 percent in the first three months of 2016, its worst quarterly performance since 2002, and remains down one-third from its all-time high last July. Drug pricing practices in the United States and setbacks for a few promising experimental drugs have taken a toll on shares.

Andy Acker, a portfolio manager at Janus Capital Group who helps oversee $7 billion in healthcare assets, says the sell-off led to a steep discount to the sector's value, especially at a time of major innovation in developing treatments for cancer, heart disease and other illnesses that affect millions.

In the wake of the declines, large pharmaceutical and biotech companies appear ready to resume deal-making.

"Buyers are starting to get interested," Acker said in an interview this week.

Last week, AbbVie Inc ABBV.N said it would spend $5.8 billion for privately-held Stemcentrx, which is developing a lung cancer treatment, while France's Sanofi SA SASY.PA went public with a $9.3 billion offer for cancer drug maker Medivation Inc MDVN.O.

Janus was the 10th-biggest investor in Medivation as of the end of the year, according to Thomson Reuters data, and Acker said multiple bidders could be interested in the company.

Reuters, citing people familiar with the matter, reported late on Tuesday that Pfizer Inc PFE.N had approached Medivation to express interest in an acquisition.   Continued...

A person holds pharmaceutical tablets and capsules in this picture illustration taken in Ljubljana September 18, 2013.   REUTERS/Srdjan Zivulovic