Trump, Republican victory to boost biotech M&A: Reuters

Print 14 November 2016
Ben Adams / Fierce Biotech

A combination of lower corporate taxes, a sense that deregulation for meds is coming and pricing issues will be dropped, bumped-up stocks and an influx of foreign cash will combine to create a perfect storm for a major biotech M&A spree, according to analysis from Reuters.

The newswire says a Trump administration with all these factors “would likely boost dealmaking in the industry,” citing industry analysts and investment bankers.

Reuters said, after speaking to analysts (who were not named), that this could see specific deals for biotech such as Tesaro ($TSRO) and Sarepta ($SRPT) who have been bolstered by strong data and a key approval, respectively, this year.

Biotech M&A activity has been pegged back during the election over the uncertainty on who would win. A Clinton victory could have meant greater pressure on drug pricing and although Trump has too criticized price tag hikes, many are betting that he will not pursue the issue as keenly as Clinton was likely to have done.

Reuters says its data show that sector stocks are still valued more than 25% below their 2015 peak, and potential M&A targets “have stood firm against suitors who tried to take advantage of the drop.”

“There's been a gap between what acquirers and shareholders are willing to pay for a biotech company and what the company's board thinks it’s worth,” said one investment banker to the newswire, who asked not to be named.

But the pace of biotech M&A “could accelerate if changes in the tax code support this trend by facilitating the repatriation of cash ‘trapped’ overseas for bigger biopharma companies,” explained Adnan Butt, an analyst at RBC Capital Markets, citing Trump’s plans to allow U.S. companies to pay a lower tax rate when bringing back overseas cash.

Yesterday, Trump also released a healthcare update saying that he will “Advance research and development in healthcare” and “Reform the Food and Drug Administration, to put greater focus on the need of patients for new and innovative medical products,” in what could also help set a bullish tone for deals.

Any major tie-ups will probably not be made for a few months yet as policies shift, but the relatively weak M&A seen in 2016 may get the kick investors want next year.

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