2011 Biotech Sector Outlook Hinges on Genzyme Deal (GENZ, BIIB, LIFE, ILMN, DNDN, HGSI, SNY)
We have previously outlined how the bull market is leaving biotech in the dust. With a lack of exponential growers in 2010 compared to 2009, there is a sad state of affairs that may be the most crucial element of all for biotech in 2011. Genzyme Corporation (NASDAQ: GENZ) could be the one critical element for the whole biotech sector. We would pay particular attention to Biogen Idec Inc. (NASDAQ: BIIB), Life Technologies Corporation (NASDAQ: LIFE), Illumina Inc. (NASDAQ: ILMN), Dendreon Corp. (NASDAQ: DNDN), and Human Genome Sciences Inc. (NASDAQ: HGSI), depending upon the outcome of the Genzyme situation.
Genzyme shares have slid after the Sanofi-Aventis (NYSE: SNY) offering peak and the larger company has asked Genzyme to come to the bargaining table. So far, Genzyme is looking for and hoping for a higher bid. So far, Henri Termeer’s stance has been that the offer undervalues the company and that the offer is opportunistic. So far, the stock has remained above the $69.00 offer. If Genzyme shares fall under that $69.00 offer, more shareholders may just decide to tender their shares to Sanofi-Aventis and call it a day.
So, why is Genzyme key to the whole sector?
Again, biotech has lagged the market and the sector has headwinds from patent issues, to cost controls out of D.C., to a more harsh FDA when it comes to drug approvals. Goldman Sachs issued very cautious research on the sector as a whole, with one exception. The biggest issue is that this tender or a rival deal could unleash more than $17 billion that would have to find a new home. For institutions and for many investors alike, it is not an unheard of event that money in one sector has to now find a new home inside the stock of another company in the same sector. At $70.23, Genzyme has a market cap of roughly $17.9 billion.
Unlocking $17 billion or more could create significant interest in the biotech and biohealth players that are smaller than Genzyme. Our data shows that there are more than 20 biotechs smaller than Genzyme which are valued at $1 billion or more by market capitalization. The next closest smaller companies tied to biotech are Biogen Idec Inc. (NASDAQ: BIIB), Life Technologies Corporation (NASDAQ: LIFE), Illumina Inc. (NASDAQ: ILMN), Dendreon Corp. (NASDAQ: DNDN), and Human Genome Sciences Inc. (HGSI).
This is giant for US biotech, and it is number four by market cap in US-listed biotechs as the table shows:
|Amgen Inc. (AMGN)||54.0B|
|Gilead Sciences Inc. (GILD)||30.7B|
|Celgene Corporation (CELG)||26.9B|
|Genzyme Corp. (GENZ)||18.2B|
|Biogen Idec Inc. (BIIB)||13.6B|
|Life Technologies Corporation (LIFE)||8.9B|
|Illumina Inc. (ILMN)||6.2B|
|Dendreon Corp. (DNDN)||6.1B|
|Human Genome Sciences Inc. (HGSI)||5.4B|
|Qiagen NV (QGEN)||4.2B|
|Abraxis BioScience, Inc. (ABII)||3.1B|
|Amylin Pharmaceuticals, Inc. (AMLN)||3.1B|
|Talecris Biotherapeutics Holdi (TLCR)||2.8B|
|BioMarin Pharmaceutical Inc. (BMRN)||2.3B|
|Techne Corp. (TECH)||2.3B|
|Regeneron Pharmaceuticals, Inc (REGN)||2.2B|
|Charles River Laboratories Int (CRL)||2.1B|
|Incyte Corporation (INCY)||1.8B|
|Medicis Pharmaceutical Corp. (MRX)||1.8B|
|Onyx Pharmaceuticals Inc. (ONXX)||1.7B|
|Savient Pharmaceuticals, Inc. (SVNT)||1.5B|
|Theravance Inc. (THRX)||1.4B|
|Acorda Therapeutics, Inc. (ACOR)||1.3B|
|Seattle Genetics Inc. (SGEN)||1.2B|
|ViroPharma Inc. (VPHM)||1.2B|
|XOMA Ltd. (XOMA)||1.0B|
JON C. OGG