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Alnylam, Intra-Cellular among analyst’s top picks for M&A as biopharma dealmaking heats up

A series of acquisitions by GSK, Merck & Co. and Sanofi has analysts at RBC Capital Markets optimistic about the biopharma M&A landscape. And the team has some potential targets in mind.

Alnylam, Intra-Cellular Therapies, Karuna Therapeutics and Xenon Pharmaceuticals are among RBC’s top takeover targets because of a mix of commercial infrastructure, competitive data in major disease areas and proven technology, the analysts said in a Tuesday note.

On the buyer side, the RBC team figured two neuroscience players, Biogen and Neurocrine Biosciences, may make a move. Other large biotechs such as Gilead Sicences, Vertex and Regeneron “would likely remain primarily focused on internal R&D investment,” the analysts said.

Alnylam is a regular guest on biotech takeout lists. Technology from the RNA interference pioneer has yielded five FDA-approved drugs, including Novartis’ PCSK9-targeted cholesterol drug Leqvio.

In addition, Alnylam’s next generation RNA-silencing therapy Amvuttra could reach the blockbuster sales threshold if a phase 3 trial in ATTR amyloidosis with cardiomyopathy hits its goal in an expected 2024 readout.

Besides Alnylam, the RBC team sees fellow RNAi player Arrowhead Pharmaceuticals as a good buyout target, too. Arrowhead has three late-stage candidates, RBC noted. The company counts Johnson & Johnson, Amgen, GSK and Takeda among its partners.

As for Intra-Cellular, the New York biotech’s Caplyta just aced a phase 3 trial in major depressive disorder or bipolar depression patients with mixed features. Industry watchers believe the drug could reach $4 billion in peak sales should it succeed in two phase 3 trials in major depressive disorder.

The RBC team also likes Karuna’s KarXT and its novel mechanism in psychiatry. The drug has delivered a phase 3 win in schizophrenia and is on track for an FDA filing in the third quarter. Fierce Biotech recently listed Karuna as one of the 10 top M&A targets in biotech for 2023.

In Xenon’s case, RBC praised the company’s lead epilepsy candidate, XEN1101, an agonist of the potassium ion channels. The company was also among JPMorgan’s top U.S. biotech picks. In a note in December, analsyts at JPM suggested XEN1101’s phase 3 data in focal onset seizures will likely be positive, adding that the drug could expand into generalized seizures and major depression.

Other companies RBC named as takeout targets include fibrotic disease specialist Pliant Therapeutics, synthetic-lethality-focused Ideaya Biosciences and Agios Pharma, which the RBC team compared to newly Pfizer-acquired Global Blood Therapeutics.

Meanwhile, Biogen could reach for its M&A war chest given its stated interest in neurology and inflammatory disease, the RBC team said. Earlier this month, Biogen named Adam Keeney, Ph.D., as head of corporate development to pursue external growth opportunities.

Biopharma M&A deals appear on the rise after a largely quiet 2022. Recently announced acquisitions of Seagen by Pfizer, Prometheus Biosciences by Merck, Bellus Health by GSK and Provention Bio by Sanofi have reminded investors that Big Pharma companies are still looking for M&A deals. Although the RBC analysts said it’s difficult to say whether dealmaking has reached a turning point, the biotech world has seen enough positive news to suggest that buyouts should once again be on investors’ minds.

Analysts at Moody’s share the same opinion. Big Pharma’s steep patent cliffs in the latter half of the decade and long-term pressure resulting from the Inflation Reduction Act could drive additional M&A deals, Moody’s said in a report published Monday.

Among large pharma companies, Moody’s recognized Bristol Myers Squibb and Merck as having high potential for significant M&A mainly because of large products losing patent protection and their recent appetite on buyouts.