A Wave Of Megadeals In Biotech. Time To Buy?

Genia Turanova's picture

Wednesday, February 13, 2019 - 2:30pm

by Genia Turanova

Since 1951, the American Cancer Society has been releasing a detailed report on the status of this dreaded disease, and our progress in fighting it. 

A valuable feature of these publications is their projections of the number of cancer cases and deaths expected in the country as a whole and in each state, broken down by specific types of cancer. Most recently, for instance, we learned that the recent trend of the decline in mortality rates -- a decline that began in 1991 -- has continued.

As of 2015, the latest year for which figures are available, the mortality rate dropped to 159 per 100,000 (a decline of 26% since 1991); this translates into 2.3 million-plus fewer cancer deaths over this period. The death rate has declined especially sharply for the four most common cancer types: lung, colorectal, breast, and prostate.

This is wonderful news, and there are two big reasons for this progress. 

One is related to public-health efforts, in particular the reduction in smoking. In 1991, about 46.3 million adults in the United States (25.7%) smoked cigarettes; by 2016, this number declined to 15.5% of all adults (37.8 million people). 

The other has everything to do with science -- it's the improvements in early detection and treatment that have been paying off big time. 

But here's the thing... this data doesn't even reflect the progress made in the treatment of cancer over the past couple of years -- progress spearheaded by immuno-oncology.

Best-selling drugs Opdivo and Keytruda, from Bristol-Myers Squibb (NYSE: BMY) and Merck (NYSE: MRK) respectively, both work by helping the human immune system to engage its own defenses to fight cancerous tumors.

More Work To Be Done
It's all good news, indeed. But cancer still claims hundreds of thousands of lives every year. The American Cancer Society estimates that in 2018 more than 1.7 million new cases were diagnosed, with more than 600,000 people losing their lives to the disease.

No wonder cancer remains a huge area of medical research and development. It's also the focus of the most recent wave of mergers and acquisitions (M&A). In the first week of 2019 alone, we saw the largest pharmaceutical acquisition ever, with BMY buying leading biotech Celgene (Nasdaq: CELG) for nearly $88.5 billion, including debt. CELG, whose value to BMY is reportedly in its cancer drug pipeline, jumped 21% on Jan. 3, when the deal was announced.

Only a few days later, on Jan. 7, Eli Lilly (NYSE: LLY) said it was buying Loxo Oncology (Nasdaq: LOXO) in an all-cash deal. The price tag: $8 billion. The reason is -- you guessed it -- LOXO's cancer pipeline. The deal is intended to strengthen Lilly's cancer-market efforts and to broaden its treatment portfolio.

LOXO jumped by almost 67% on the day the acquisition was announced. The market seems to believe that another bid might emerge: LOXO already has one cancer drug approved (larotrectinib) as recently as November 2018. LOXO, or Lilly if and when the transaction closes, also owns LOXO-292, a drug candidate that addresses more-common cancer mutations than larotrectinib.

Action To Take
These two large deals indicate both growing large pharma interest in cancer-related medicines, and also its willingness to pay up for the best and the latest drugs targeting cancer.

In my premium newsletter, Fast Track Millionaire, we already have two biotech companies in our portfolio that seem like potential targets for a larger pharma or biotech seeking to expand its cancer-related business. One already has a cancer therapy in place, and the other has a unique potential to do so.

My advice: watch this space closely in the months ahead. This could just be the start of a wave of acquisitions in the cancer treatment space, and investors may have an opportunity to scoop up shares before the next deal is announced and reap a big payday.

P.S. If you've paid attention to the biotech space for any time at all, then you know the rewards can be huge... 

I just released a shocking new report on the breakthroughs being made in the field of "personalized medicine." If you're not familiar with the term, you soon will be -- because it could disrupt the entire healthcare industry, usher in a wave of new treatments, and save countless lives. To put it simply, it could be the biggest investment opportunity of our lifetime. 

If you'd like to learn more, read my report right now.

Genia Turanova does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.