As patent cliffs approach in the pharma industry, companies must replace lost revenue streams, either by creating new product pipelines or through M&A, an ongoing theme in the space, Analyst Michael Yee of RBC Capital Markets says.
“The only way to [replace lost revenue] is to either have new drugs in your pipeline or go out and buy something with the war chest of cash and cheap capital that is out there,” Yee said. “Everyone has their own proprietary pipelines, but that’s risky, so you have to support it with more deals.”
Yee says a potential acquisition target is Human Genome Sciences (HGSI), which he predicts will get approval for its lupus treatment Benlysta by year end.
“I think that this is a potential $2 billion to $3 billion drug over the next five years,” Yee said. “I think that this will be a potential takeout candidate from either the likes of J&J (JNJ), Abbott (ABT), Amgen (AMGN) or Roche (RHHBY), who all have rheumatology franchises where Benlysta could fit into.”
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