Investors may want to keep an eye on biopharmaceutical stocks.
We could be on the cusp of a massive wave of new M&A activity. As Reuters reports: “Biotechs are coming off their worst April since 2002, and the crash in valuation has made them attractive M&A targets, especially when small drug makers are grappling with a cash crunch.”
Fierce Biotech backs this up: “Biopharmas have $1.7 trillion to spend on deals this year, and big players like Novartis, Pfizer and Merck & Co. have made it pretty clear they’re on the hunt for acquisitions. Billions of dollars are obviously available for megadeals, and an endless sea of biotechs are giving shoppers a long list of options.”
In fact, we’re already starting to see more M&A activity trickle in.
Pfizer, for example, just announced its’s buying Biohaven Pharmaceutical, makers of the migraine drug Nurtec, for $11.6 billion. This would give Pfizer all it needs to tap into the migraine market, with a drug that could see up to $4 billion in sales by 2030, according to The Wall Street Journal.
So, how can we potentially profit from that news?
One way is to jump into a biotech ETF, such as the SPDR S&P Biotech ETF (XBI). With an expense ratio of 0.35%, the XBI ETF offers exposure to stocks, such as Iovance Biotherapeutics, Karuna Therapeutics, PTC Therapeutics, and Halozyme.
You can also look at biotech companies themselves. Take Acadia Pharmaceuticals (ACAD), for example. Acadia’s NUPLAZID drug, which is used to help treat the hallucinations and delusions associated with Alzheimer’s disease psychosis (ADP), just saw net sales of $115.5 million in the first quarter of 2022, an 8% increase year over year. Even better, NUPLAZID sales guidance is expected to land in a range of $510 million to $560 million this year.
There’s also Exelixis Inc. (EXEL), which, according to a company press release, just: “Announced initiation of the dose-escalation stage of the first-in-human phase 1 trial of XL114, a novel anti-cancer compound that inhibits the CARD11-BCL10-MALT1 complex, as a monotherapy in patients with non-Hodgkin’s lymphoma (NHL) who have received prior standard therapies.”
All signs indicate it may be a good idea to start venturing into this sector.
