Will Suitors Line Up to Buy These Biotech Stocks Next?

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Rare disease powerhouse Alexion Pharmaceuticals is paying a staggering $8.4 billion to get its hands on Synageva Biopharma's promising pipeline of enzyme replacement therapies.

Synageva's eye-popping price tag is sparking speculation over which biotech companies could be acquired next, including these two companies that I think could be on acquirers' radar.

No. 1: BioMarin TherapeuticAny discussion of rare disease drug companies has to begin with BioMarin. BioMarin has one of the most robust rare disease product line-ups and pipelines, and it's frequently been the target of M&A chatter.

Unlike Synageva, BioMarin already generates revenue thanks to a slate of high-priced therapies targeting ultra-rare conditions. The company's top seller is Naglazyme, an enzyme replacement therapy that treats MPS VI, costs $450,000 per year, and had sales of $78.2 million in the first quarter.

BioMarin also markets Kuvan, a treatment for PKU that had sales of $50.2 million in Q1, and Aldurazyme, a therapy used to treat MPS I that had first-quarter sales of $18.2 million.

BioMarin's most intriguing drug, however, could be Vimizim, a therapy for Morquio A that costs $380,000 per year and that won FDA approval a year ago.

Vimizim's global roll-out has been so strong that first-quarter sales of it jumped 37% quarter over quarter to $50.6 million, prompting BioMarin to bump up its full-year forecast for Vimizim sales to between $200 and $220 million from prior expectations of between $170 million and $200 million.

BioMarin thinks these drugs will combine to produce sales of between $840 million to $870 million this year, up from $751 million in 2014, and that could attract an acquirer, but it's BioMarin's pipeline that could make for a Syngeva-like price tag.

BioMarin has just filed for FDA approval of drisapersen, a novel exon-skipping therapy that could help 13% of Duchenne's Muscular Dystrophy patients, and an EU filing for approval should be coming soon.

BioMarin is also developing a PARP inhibitor, BMN-673, to battle cancer in people with a specific genetic mutation, and a therapy for Pompe disease, and results from a phase 2 trial studying BMN-111 in achonodroplasia are expected to be released shortly, too.

Source: BioMarin Therapeutic.

BioMarin's pipeline potential makes it one of the most attractive players in the rare and ultra-rare drug space, but that pipeline could also present a roadblock to a sale. Investors already value BioMarin at more than $18 billion, and it could be tough for an acquirer and BioMarin to agree on the peak sales potential for these drugs, many of which target patient populations that are hard to quantify. As a result, it might be tough to negotiate a price that both companies could agree on.

No. 2: Amicus Therapeutics Amicus Therapeutics is another intriguing rare disease biotech company that is much smaller than BioMarin.

Amicus doesn't have any drugs on the market yet, but it does plan to file for U.S. and EU approval of migalastat in the second half of this year.

Migalastat is an oral drug that could treat up to half of Fabry disease patients. The drug works differently from enzyme replacement therapies, which are the current standard of care for Fabry disease. That has Amicus thinking that migalastat could eventually be used as both a monotherapy and in combination with commonly prescribed ERTs, such as Sanofi's Fabrazyme or Shire's Replagel, two drugs that had a combined $990 million in annual sales last year, at current euro to dollar exchange rates.

In addition to migalastat, Amicus plans to move its own enzyme replacement therapy for the treatment of Pompe disease into clinical trials by year-end. If successful, this treatment could end up competing against Sanofi's Myozyme, an ERT with sales of $610 million in 2014.

Amicus is spending a great deal of money this year in anticipation of a migalastat approval, and its spending will head higher as pre-clinical therapies move into human trials. That means losses are likely to remain high for the company. In the first quarter, Amicus' operating expenses totaled $24.1 million, up from $16.1 million a year ago, leading to Amicus reporting a net loss of $24.3 million last quarter.

Fortunately, the company appears to have enough cash on hand to handle these rising expenses -- for now. Exiting the first quarter, Amicus had $151.6 million in cash and little debt, and that has Amicus thinking it has enough cash to last through the middle of 2016.

Tying it togetherBioMarin is arguably the gold standard in the rare disease category, but it's already pretty pricey. Amicus' $1 billion market cap means it's far cheaper than BioMarin, but Amicus doesn't have any approved products on the market (yet), and its pipeline is smaller, so it's more risky.

Since acquisition rumors in this industry are common, and they often don't pan out, investors will want to consider these stocks based on their fundamentals, not their buyout potential. In both cases, I think these companies could as easily succeed as stand-alone companies, and that could make them great stocks to own in long-term portfolios.

The article Will Suitors Line Up to Buy These Biotech Stocks Next? originally appeared on Fool.com.

Todd Campbell owns shares of Amicus Therapeutics and BioMarin Pharmaceutical. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool recommends BioMarin Pharmaceutical. 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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