Biotech M&A Action Gets Another Jolt With $2 Billion Avadel-Alkermes Deal
Deal volume continues to show a notable pick up in the biotech and biopharma space.
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On Wednesday, Avadel Pharmaceuticals (AVDL) agreed to be purchased by Alkermes plc (ALKS) for just over $2 billion.
This immediately followed the settlement of a long-standing litigation battle with Jazz Pharmaceuticals (JAZZ) . I have highlighted Avadel Pharmaceuticals on these pages a few times over the past year, and the buyout was the second of my portfolio positions to be taken out over the past month. The other being Merus N.V. (MRUS). The litigation settlement clears some uncertainty around Jazz Pharmaceuticals as well and should be viewed as a positive for that mid-cap biopharma name.
Avadel Pharmaceuticals was the fifth significant acquisition, by my count, in the biotech/biopharma space over the past five weeks. The uptick in deal volume certainly has boosted sentiment around these sectors in the fourth quarter as some enthusiasm has returned to this area of the market.
It was a good acquisition by Alkermes, another name I own and added to on the announcement via some covered-call orders. It was a reasonably priced purchase and a good fit within its existing product portfolio. Alkermes already had a candidate in mid-stage development that was targeting narcolepsy like Avadel’s primary asset. The buyout should be accretive after the acquisition is completed in early 2026 and add over $350 million in revenues in FY2026. Alkermes had over $1 billion in cash and marketable securities on its balance sheet prior to the purchase and no long-term debt. Both Piper Sandler and RBC Capital reissued their Buy ratings on ALKS and boosted their price targets on the stock.
I also added a few shares to my stake in Aurinia Pharmaceuticals (AUPH) . The company has a similar market cap to Avadel Pharmaceuticals before it was bought out. Also, like Avadel, Aurinia has one key FDA approved product on the market. It would make a good bolt on acquisition for a larger concern and has been the subject of sporadic buyout rumors in recent years. Aurinia is already profitable and is delivering revenue growth in the mid-teens. The company is solid as a stand-alone entity but would be accretive to a larger name trying to fill out its product portfolio.
I am also monitoring ACADIA Pharmaceuticals (ACAD) closely. The company has two key products on the market that are delivering sales growth in the low teens. ACADIA is profitable and is seeing solid earnings growth. However, a key pipeline asset washed out recently in late-stage development. This could mean this mid-cap is more amicable to being acquired or being an acquirer itself to expand its product portfolio.
And those are some quick thoughts on the small- and mid-cap biopharma space given the recent upticks in M&A activity.
At the time of publication, Jensen was long ACAD, ALKS, AUPH, AVDL, JAZZ and MRUS.
