Healthcare Merger Monday: These 3 Stocks Could Be Healthcare's Next Buyout Targets

The investment bankers were busy this weekend with four healthcare industry acquisitions announced today. Teva Pharmaceuticalsis buying Auspex Pharmaceuticals for $3.5 billion, Horizon Pharma picked up Hyperion Therapeutics for $1.1 billion, Cellular Dynamics was purchased by Fujifilm -- just a $307 million deal, but more than a 100% premium on Friday's close -- and in the pharmacy benefit management space, UnitedHealth Group bought Catamaranfor $12.8 billion.

Which company might be acquired next? Read on to see why our team of healthcare experts think Esperion Therapeutics (NASDAQ: ESPR), BioMarin Pharmaceuticals (NASDAQ: BMRN), and Acadia Pharmaceuticals (NASDAQ: ACAD) could be next on the auction block.

Todd Campbell:First, let me state that investors shouldn't buy shares in a company just because they think a suitor could emerge. Instead, they should focus on buying companies like Esperion Therapeutics because of their potential as a stand-alone company and then consider an acquisition as an unlikely, yet welcome, outcome.

Esperion's ETC-1002, a cholesterol-busting medicine, just put up impressive mid-stage trial results showing that combining it with statins can significantly reduce cholesterol levels in patients. If those results are duplicated in to-be-held phase 3 trials, then Esperion could have a multibillion-dollar blockbuster therapy on its hands.

Express Scriptsestimates that 71 million Americans have high cholesterol, and since tens of millions of patients already take statins, ETC-1002 could become a big seller someday. Just how big is uncertain, but Esperion's co-founder is Roger Newton, the co-inventor of the wildly successful Lipitor.

Indeed, Lipitor was the world's biggest-selling drug of all time, notching $125 billion in sales prior to losing patent protection. ETC-1002 isn't likely to be that successful, but it could certainly have blockbuster potential. Analysts think PCSK9 cholesterol fighters making their way through the FDA approval process could rake in $2 billion a year, or more. With a billion-dollar opportunity like that ahead of it, I wouldn't be shocked if a large drugmaker makes a bid for Esperion -- especially if the upcoming phase 3 trialspan out.

Brian Orelli: I'll second Todd's assertion that you shouldn't buy a company simply because it might get acquired. That's a pretty poor investment thesis, especially since there's usually a lot going on behind closed doors that investors aren't privy to: What premium on the current price is management willing to accept? Does confidential information the company shares with potential acquires make it more or less attractive?

Take BioMarin Pharmaceuticals, for instance. The biotech has been rumored to be a takeover target for years since BioMarin specializes in orphan drugs, a specialty pharma has an appetite for. While the company remains independent for reasons no one outside of BioMarin's management really knows, it's still a solid company, and investors have been rewarded nevertheless.

With the company approaching profitability, BioMarin still looks like an attractive bolt-on acquisition for a pharma looking to add a few already-approved drugs and a decent pipeline.

There's one caveat here, though. BioMarin recently acquired Prosensafor its Duchenne Muscular Dystrophy drug, drisapersen, which isn't approved yet and has a bit of a checkered past, having failed a phase 3 trial. Potential acquirers are likely to wait until the biotech is able to gain FDA or EU approval to sell drisapersenbefore acquiring BioMarin, because the likelihood of approval is hard to quantify.

Alternatively, an acquirer might offer BioMarin's shareholders a "contingent value rights" that pays them more after the acquisition if drisapersenis approved, which is actually the mechanism that allowed BioMarin to acquire Prosensa.

George Budwell: Acadia Pharmaceuticalshas repeatedly been the subject of the buyout rumor mill ever since it reported stellar late-stage results for its experimental Parkinson's disease psychosis drug Nuplazid (pimavanserin) over two years ago. And the underlying reasons for these lingering rumors are easy to understand.

First off, this devastating disease has no real treatment options beyond supportive care, meaning Nuplazid wouldn't face any meaningful competition upon its commercial launch. Experts thus have the drug's peak sales pegged at nearly $3 billion a year.

And with a market cap of about $3.3 billion at present, Acadia appears to be fairly valued in light of Nuplazid's value proposition, giving any buyer a good bit of upside potential going forward.

So, which big pharma might be lurking in the shadows? My money is onAbbVie. AbbVie already has an important new Parkinson's disease drug in Duopa -- so a buyout of Acadia would significantly strengthen the drugmaker's position in this vastly under-served market.

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Brian Orelli has no position in any stocks mentioned. George Budwell owns shares of AbbVie.Todd Campbell owns shares of BioMarin Pharmaceutical. The Motley Fool recommends BioMarin Pharmaceutical, Catamaran, Express Scripts, Teva Pharmaceutical Industries, and UnitedHealth. The Motley Fool owns shares of Catamaran and Express Scripts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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