Sure enough, Merck stepped up to purchase Schering-Plough for $41 billion in March.
And making the case for someone to buy Bristol-Myers is easy…
- It recently divested non-core assets.
- It's sitting on $8 billion in cash, which acts as an instant rebate.
- It boasts a solid pipeline of cancer drugs, which hold the potential for faster FDA approval and higher margins.
- Multiple suitors exist including Sanofi-Aventis (NYSE: SNY), GlaxoSmith Kline (NYSE: GSK), AstraZeneca (NYSE: AZN) and Johnson & Johnson (NYSE: JNJ).
The fact that BMY shares trade at their lowest valuation in a decade only makes a deal more likely. And it doesn't hurt that we get paid a 5.4% dividend yield while we wait.
~ Onyx Pharmaceuticals (Nasdaq: ONXX): If you're looking for the next biotech deal, Onyx could be it. In Nexavar, it boasts the first FDA-approved drug for liver cancer, the third-deadliest form of cancer. And it just made a move to strengthen its pipeline by acquiring privately held Proteolix. The potential for additional applications for Nexavar should entice the company's current partner, Bayer AG, to make a move to acquire ONXX before someone else does.
~ Medidata Solutions (Nasdaq: MDSO): The $787 billion federal stimulus package includes roughly $20 billion for healthcare information technology (IT) – a sum that only serves to accelerate the trend to bring the healthcare industry into the digital age. And that bodes well for Medidata.
I've outlined the fundamentals for Medidata here before. In short, its products eliminate millions of dollars in waste from each clinical trial. And suitors would be buying the fastest growing company in the space – the company's revenues jumped 32% last quarter.
Moreover, a measly market cap of $362 million makes a takeover more compelling, as suitors could easily buy MDSO with cash on hand.
And remember… investing in a stock before a takeover announcement results in an average gain between 43.5% and 53.7%, according to the number-crunchers at FactSet MergerStat. So clearly, it's a strategy worth pursuing.