Feb 7 Healthcare deals will rebound this year
after a weak 2012, with providers of innovative technologies,
cancer treatments and diagnostics being the most likely targets,
the founder and managing partner of healthcare-focused OrbiMed
Samuel Isaly, who manages and advises healthcare funds
including the Eaton Vance Worldwide Health Sciences Fund
, named Onyx Pharmaceuticals Inc and Insulet
Corp as among the potential takeover candidates.
Onyx markets cancer drug Nexavar with German partner Bayer
AG and also has blood cancer drug Kyprolis, which is
approved to treat multiple myeloma in patients who have tried at
least two other medicines.
"Such a grouping of products is unusual in a single company.
The market capitalization of Onyx is bite-sized and it would fit
with many larger companies," Isaly told Reuters.
Onyx has a market value of $5.58 billion.
Insulet has developed a tubeless insulin pump that was
approved by the U.S. Food and Drug Administration in December.
The product, OmniPod, includes a pod that can be attached to the
patient's body and a wireless hand-held device that manages the
"Insulet is not yet profitable - but should turn to profits
next year. It would be an excellent strategic fit with any other
participant in the diabetes business," said Isaly, who manages
assets of $6.5 billion.
"Innovation is the key word," he said, noting this is what
the pharmaceutical giants, struggling with blockbusters coming
off patent and a lack of new drugs in their pipeline, are
looking to tap.
OrbiMed, which also invests through its hedge fund and
private equity businesses, holds a 2.12 percent stake in Onyx
and a 0.44 percent stake in Insulet, according to Thomson
Global healthcare deal volume fell 9 percent in the nine
months to Sept. 30, according to a PricewaterhouseCoopers
report. Total value of deals dropped 17 percent.
NICHE VS MASS
Niche drugs, or treatments for rare, orphan indications, is
another area that Big Pharma is closely looking at for
acquisitions, the veteran fund manager said.
Many industry experts think the days of mass-market
blockbuster pills such as Pfizer Inc's cholesterol drug
Lipitor are over, and that niche, targeted therapies that can
command high prices might become the norm.
"Big Pharma is disappointed with the safety requirements for
widely used drugs that treat millions of people," Isaly said.
He mentioned BioMarin Pharmaceutical Inc, in which
OrbiMed funds control a 5 percent stake, and Alexion
Pharmaceuticals Inc, in which the funds have a 1
percent stake, as companies that have been able to tap the
potential of orphan drugs.
Alexion's rare blood disease drug Soliris is sold to just a
few thousand patients worldwide, yet Thomson Reuters Pharma
estimates sales to reach $1.65 billion in 2013 and $3.58 billion
by 2017, thanks to a U.S. list price of $440,000 per patient,
BioMarin, which has a market value of $6.93 billion, has
four drugs on the market, two of which treat metabolic disorders
caused by the absence of certain enzymes.
However, in a recent interview with Reuters, BioMarin CEO
Jacques Bienaime said the company would not consider a buyout
offer for even a 25-30 percent premium.
BioMarin, Alexion and Onyxx were also part of eight U.S.
biotech companies that Morningstar analysts had flagged as
potential targets in 2012.
Isaly's publicly available, long-only funds also include the
Worldwide Healthcare Trust and the Biotech Growth Trust
The Eaton Vance Worldwide Health Sciences Fund, the largest
of these with assets of about $950 million, underperformed its
benchmark MSCI World Health Care Index last
The fund had returns of about 15 percent, while the MSCI
index returned more than 17 percent.
Isaly expects a 15-20 percent return on each of the funds in