Two Biotechs That Could Get an M&A Boost
Let's check these late-stage healthcare names that could find themselves in the arms of larger suitors.
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Finding pockets of value in the overall market at this point is proving difficult. But one sector that has woefully underperformed for many years now is biotech. Higher interest rates have been one factor for the sector lagging behind, as has a relative dearth of M&A activity. And nothing excites the animal spirits in this part of the market more than new buyouts.
There was some notable movement on the acquisition front on Monday. French drug giant Sanofi SNY entered into an agreement to purchase Blueprint Medicines BPMC for just over $9 billion. Blueprint’s shareholders also received some non-tradeable contingent value rights or CVRs that can provide additional payouts based on regulatory milestones being met. Not surprisingly given this news, the biotech sector has had a couple of good days of performance to start the new trading month.
In today’s column, I am going to highlight a couple of biotech names I like and hold via covered-call positions that also have seen buyout speculation in recent months. Let’s start with MoonLake Immunotherapeutics MLTX. This is a clinical stage biotech name I highlighted that I was starting to accumulate via covered-call positions last October.
The stock got a nice boost in trading Tuesday when it was reported Merck MRK approached the company with a better than $3 billion buyout offer earlier this year that MoonLake rejected. That deal could be sweetened once pivotal Phase 3 trial data comes out late this summer around MoonLake’s lead drug asset sonelokimab. This is a compound that is being evaluated to treat hidradenitis suppurativa, or acne inversa, a dermatological condition. Data is expected to pave the way for Food and Drug Administration approval in 2026. The stock was upgraded in the first quarter by both RBC Capital and Goldman Sachs due primarily to the potential of this drug. MoonLake also secured a credit facility in April that will allow it to roll out sonelokimab as a standalone entity should an acceptable takeover offer not be accepted by then.
Cardiff Oncology CRDF is another clinical stage biotech name that has seen on and off again buyout rumors. Its primary asset is called onvansertib. This candidate is being evaluated both as a monotherapy and as part of a combination therapy against several indications. The most promising and advanced is as part of a combination therapy with Roche’s RHHBY Avastin against first-line RAS-mutated metastatic colorectal cancer or mCRC. This condition impacts some 50,000 individuals in the United States.
Onvansertib has the potential to be the first PLK1 inhibitor approved for mCRC. The inhibitor has a superior half-life to the current standard of care and more importantly has demonstrated significantly better efficacy in a mid-stage clinical study. Another cohort of that ongoing trial has been fully enrolled, and additional data should come from it in the second half of this year. If the data continues to be positive, Cardiff, with an approximate $250 million market cap, could also find itself in the arms of a larger suitor.
At the time of publication, Jensen was long CRDF and MLTX
