Biotech M&A Will Be In Focus in 2012 - Goldman

December 15, 2011 11:41 AM EST
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Some smaller biotech stocks are seeing interest early Thursday amid a report from Goldman Sachs saying that they expect M&A to stay in focus in 2012.

Goldman said capital allocation will be key. They prefer the strategy of Gilead Sciences Inc. (Nasdaq: GILD), which bought VIVUS Inc. (Nasdaq: VVUS), over Amgen (Nasdaq: AMGN), which used its funds for share buybacks.

"Given the scarcity of growth assets, we see M&A continuing to be a significant focus in the industry," a Goldman analyst said.

Companies in the biotech sector that have the highest probability of M&A activity, according to the firm, are: Alexion Pharmaceuticals (Nasdaq: ALXN), Dendreon (Nasdaq: DNDN), Human Genome (Nasdaq: HGSI), Incyte Corporation (Nasdaq: INCY), InterMune (Nasdaq: ITMN), Onyx Pharmaceuticals, Inc. (Nasdaq: ONXX), Momenta Pharmaceuticals (Nasdaq: MNTA), Seattle Genetics (Nasdaq: SGEN), Vertex Pharmaceuticals (Nasdaq: VRTX), Pharmasset, Inc. (Nasdaq: VRUS).

In select areas of biotech, Goldman said they expect M&A activity to continue in Hep C following the GILD-VRUS deal and others. Biotech companies with unpartnered hepC assets include Idenix Pharmaceuticals Inc. (Nasdaq: IDIX), Inhibitex, Inc. (Nasdaq: INHX) and Achillion Pharmaceuticals, Inc. (Nasdaq: ACHN), the firm notes.

The Sanofi (NYSE: SNY)/Genzyme deal earlier in the year shows Pharma's appetite for de-risked orphan drugs, Goldman says. Biotech companies with established orphan drugs include Alexion Pharmaceuticals, Inc. (Nasdaq: ALXN), BioMarin Pharmaceutical Inc. (Nasdaq: BMRN), ViroPharma Inc. (Nasdaq: VPHM).

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