Phathom Pharmaceuticals (NASDAQ:FAT), rhythm pharmaceuticals (NASDAQ:RYTM), and Vaxcyte (NASDAQ:PCVX) are the most likely targets in the pharmaceutical space, according to a Needham analyst.
The three companies are the most likely to be acquired in Needham's coverage universe, according to Needham analyst Joseph. Stringer wrote in a note Friday. Needham has a buy rating and $26 price target on Phathom (FANTASTIC), a buy rating and a $95 price target on Vaxcyte (PCVX) and a $50 price target and buy rating on Rhythm (RHYTHM).
“We believe M&A activity will remain above average through the remainder of 2024 and will lean more toward mid-stage target companies, with deals between $1 billion and $3 billion and a particular focus on oncology, immunology and rare diseases,” Stringer wrote in the note.
Stringer noted that there were a total of 13 M&A deals during the first quarter, well above the quarterly average of 8.2 since 2018, and the 7 deals for public companies were above the quarterly average of 4.9 since 2018. .
Stringer expects Bayer (OTCPK:BAYRY), Roche (OTCQX:RHHBY) and Regeneron (REGN) to be the most likely to buy earlier-stage companies. Takeda Pharmaceutical (TAK), Biogen (BIIB), Bristol-Myers Squibb (BMY), and Pfizer (PFE) are more likely to buy late-stage companies.
“Average deal sizes, 1-day premiums, and stock withdrawal multiples have remained around their respective historical averages over the past few quarters,” Stringer explained. “A preference for late-stage companies is still evident, but we note that a recent flurry of deals for earlier-stage biotech companies may reflect Pharma's greater appetite for riskier assets.”
The Needham analyst also noted that average takeout premiums appear to be declining. In 1Q24, the average 1-day carry premium was 73%, below the historical average. of 77%.
According to Stringer, stock purchase multiples have also trended downward in recent quarters. Of the four most recent public transactions for which financial data is available, all were below the historical average.