Four ASX life sciences companies have been sold since the start of January, and analysts think we could see more on the takeover table.

Gene technologist RHS (ASX:RHS) went yesterday, Viralytics (ASX:VLA) was taken out last week, LifeHealthcare Group (ASX:LHC) two weeks before that, and Sirtex Medical (ASX:SRX) in January.

ASX investors can expect more companies with targets on their backs thanks to cashed-up Americans looking to grow their earnings, says Morgans analyst Scott Power.

Companies with approved products that have a global application — and importantly a US focus — are attractive as takeover targets Mr Power says.

Potential takeovers could include medical devices companies Impedimed (ASX:IPD), AirXpanders (ASX:AXP), Osprey (ASX:OSP) and Visioneering (ASX:VTI), and biotechs Paradigm Biopharma (ASX:BIO) and perhaps Bionomics (ASX:BNO).

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Renaissance Equities’ Anton Uvarov believes biotech could be coming back — particularly since the Viralytics deal — after being neglected as the mining and tech sectors garnered all the love from August 2017.

“People are getting tired of [mining and tech] and moving into something more tangible. Biotech is traditionally more science-driven and there could be less hype but more things done,” he told Stockhead.

Data talks

According to Pitcher Partners’ Dealmakers 2018 report, there were only 27 deals among mid-sized companies in the life sciences space last year, compared to 16 in 2016.

“The home care and healthcare services industry has been a source of much activity in 2017, with the trend likely to continue over 2018 as the industry undergoes consolidation, with potential interest originating from bigger industry players, offshore bidders and PE buyers,” the report said.

“[For example] in November 2017, Western Australia-based in-home healthcare services provider Silver Chain was reported to be actively looking for acquisition targets like KinCare, a family-owned Sydney-based home care provider, according to proprietary Mergermarket intelligence.”

Too soon, too cheap?

Julian Mitchell, a fund manager with Armytage Private, is resigned to the fact that some of his favourite portfolio companies are likely to be on the auction block.

Mr Mitchell believes Australian life sciences companies sell themselves too cheaply.

“We have a tendency in Australia to take a quick turn and not fully understand the value of the tech,” he told Stockhead.

“I just wish Australian companies wouldn’t accept a discount for the good work they’ve put in, in some cases for over a decade.”

He taps Melbourne-based Cellestis, taken over by Qiagen in 2011 for $341 million, and iCeutica bought between a pre-IPO capital raising and a planned IPO, as examples.

Mr Mitchell believes Visioneering could be a possible target. Although he doesn’t believe they have reached a stage where they are highly successful yet they do have one of the only treatments for child myopia on the market.

“Someone like [US company] CooperVision who is aggressive and is an acquirer would see that as a fantastic business and grab it as it takes off.”

Shark fibrosis researcher AdAlta (ASX:1AD) is another.

While most biotechs might expect an approach after a Phase 2a or Phase 2b trial, Mr Mitchell has noticed the same thing CEO Sam Cobb has: most fibrosis deals happen after Phase 1 clinical trials, and AdAlta will complete their Phase 1 by the end of this year.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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