These tech and pharma stocks are looking to M&A to drive growth in global markets

In the financial world one topic which always makes headlines is mergers and acquisitions (M&A). Why? Because they’re kind of a big deal – and can have a big impact on companies and investors.

A merger describes where one company ceases to exist after becoming absorbed by the other and an acquisition is when one company acquires or obtains a majority stake in another, which retains its name and legal structure.

M&A is generally considered good for the companies involved and investors with benefits including greater financial strength, higher market share often in expanded locations, reduced competitive threat and access to greater labour and other assets.

There was a slowdown in the deal-making in 2022 amid a backdrop of geopolitical and economic uncertainty. In fact, the total value of global M&A had fallen 37% to $3.66 trillion by December 20, 2022 after hitting an all-time high of $5.9 trillion in 2021.

Oof.

But earlier this year, Goldman Sachs flagged that M&A activity looked set to pick up for 2023, and McKinsey says the biopharma sector is likely to see an increase in dealmaking – including traditional M&A.

In fact, a recent report by Ernst & Young flagged that large pharmas in the US have collectively more than US$1.4 trillion to fund M&A and strategic partnerships.

All this action in the tech and biotech sectors makes sense because M&A is a critical part of the value chain, with smaller stocks doing the product development legwork before being bought out by the big boys.

And while there’s a lot of activity in the resources sector too, that’s a story for another day.

Right now, let’s take a look at which ASX tech, pharma – and similar – stocks are making sweet deals and nabbing a bigger market share so far this year.

Who’s wheelin’ and dealin’?

HALO Technologies (ASX:HAL)

HALO is an online global equities research and trade execution software solution that brings sophisticated institutional-grade analytical frameworks and market insights to everyday investors.

In February the company made progress towards entering the United Kingdom financial services market, after agreeing to a strategic acquisition for licensed entity, Resilient Fund Managers Ltd, for £500,000.

The deal will allow the company to enter the UK market, offering its unique online global equities research and trade execution software services there by leveraging Resilient’s established regulatory structure.

The company is looking to requalify the existing licence (quicker than applying for one from scratch) and is currently engaged with the UK Financial Conduct Authority to secure approval for change of control application.

The acquisition also opens the window for HALO to operate future acquired financial service firms and formalise strategic distribution partner agreements in Europe.

In its March quarterly, the company said despite revenue for the period at $11.4m (down 3.7% on FY21 pro-forma), there are “positive signs of a long-awaited market recovery heading into FY23, with February 2023 brokerage revenue representing a significant improvement on recent trading and being the second highest brokerage revenue month in the last 14 months.”

HALO is confident it’s on track to return to profitability in the first half of FY23 – providing market conditions remain the same as they are currently, or improve during the period.

The ultimate plan is to give Aussie traders access to global markets (and deliver revenue growth via international expansion) with subscribers currently able to analyse and invest in over 35,000 securities across 30 different exchanges – including the ASX, NASDAQ, NIKKEI and more.

Melodiol Global (ASX:ME1)

In May, the cannabis company picked up Health House International (ASX:HHI), an international pharmaceutical distributor, specialising in (but not limited to) the distribution of medicinal cannabis products in Australia and other international markets.

HHI generated $5.95m in cash receipts for the three-month period ended 31 March 2022 – a 10.1% increase on the prior period and a 36.4% rise on the prior comparative period.

Combined CPH revenue and HHI cash receipts as a proxy for revenue takes unaudited pro forma revenue to $8.26m or over $33m on a last quarter annualised basis.

HHI is also actively broadening its licence suite, lodging applications for state licence amendments to import and distribute medicines containing psilocybin and MDMA for either clinical trial purposes or certain mental health conditions under authorised psychiatrists.

“The acquisition highlights the company’s ongoing commitment to advancing a commercial pathway in the Australian market, following TGA indication that medicines containing psilocybin and MDMA for prescription by specifically authorised psychiatrists for the treatment of certain medical conditions would be permissible from 1 July 2023,” CPH said.

The company also has a Canadian subsidiary – Mernova Medical – which secured approval into its eighth province of Alberta in May.

In 2022, Alberta had a total of 755 cannabis retailers which generated C$73.8m in monthly sales – highlighting considerable sales growth potential for Mernova.

Next DC (ASX:NXT)

In May, the data centre player announced it would be developing data centres on two recently acquired commercial property sites in Kuala Lumpur, Malaysia (KL1) and Auckland, New Zealand (AK1).

KL1 is located ~10km from the Kuala Lumpur CBD, with total power planned of 65MW. AK1 is located in the Auckland CBD, with total power planned of 10MW+.

“Building upon the success we have achieved in Australia over the past decade, we aim to replicate our proven business model in these new markets,” CEO Craig Scroggie said.

“New Zealand and Malaysia are just the first greenfield geographic expansion opportunities outside of Australia, and we are excited about the possibilities ahead.”

Construction at AK1 and KL1 is expected to commence in FY24 with the sites targeting practical completion in 1H FY26.

Incannex Healthcare (ASX:IHL)

In August last year, the cannabis and psychedelic company acquired APIRx Pharmaceuticals which included 22 additional clinical and pre-clinical research and development projects, representing aggregate addressable markets of approximately US$400 billion per annum.

These projects are underpinned by an intellectual property portfolio that includes 19 granted patents and 23 pending patents.

Initial high-priority drug candidates resulting from the acquisition included CanQuit and CanQuitO – chewables that combine nicotine and cannabinoids, and cannabinoids and opioid antagonists for smoking cessation and opioid addiction, respectively.

IHL also recently announced plans to redomicile to the US, with the board anticipating the move will mean a simplified corporate structure for potential future merger, sale or acquisition transactions – which may increase Incannex US’s attractiveness to potential merger partners, sellers or acquirers.

NEXION Group (ASX:NNG)

Another data storage company, NNG is in the process of acquiring Wellington-based AIScorp and Silicon Systems, the addition of which will make the company a considerably larger organisation with broader skills and greater geographic reach.

The rationale behind the acquisitions is that global reach provides the opportunity to scale and hybrid-cloud Software-as-a-service (SaaS) solutions deliver higher margins.

Once the New Zealand acquisitions are completed, the company plans to expand its horizons to Canada and beyond with additional acquisitions already under consideration that complement its product mix and extend its technical capability.

HAL, ME1, NXT, IHL and NNG share prices today:

Bioxyne (ASX:BXN)

In May, the healthcare player acquired Breathe Life Sciences (BLS), with its well-established Dr Watson brand of medicinal cannabis, MDMA, psilocybin, and “pre-pharmaceutical” consumer healthcare products such as mushrooms, nootropics, and novel food supplements.

And the move is paying off, with Bioxyne hitting a $1 million annualised revenue run rate in May 2023 for Dr Watson brand sales to Amazon in the UK.

In March 2023, after several months of negotiations, BLS was invited by Amazon to the exclusive invite-only CBD pilot program in the UK.

And just this week, the company announced its trademarked Dr Watson mushroom nootropics are now selling on Amazon US. A boarder range of products are also being sold on Amazon Japan.

Telix Pharma (ASX:TLX)

Telix plans to expand its artificial intelligence (AI) capability by acquiring Vienna-based Dedicaid GmbH, a spin-off of the Medical University Vienna that is a clinical decision support software (CDSS) AI platform capable of rapidly generating indication-specific CDSS applications from available datasets, for use with positron emission tomography (PET) and other imaging modalities.

The company also plans to acquire UK-based Lightpoint Medical and its SENSEI radio-guided surgery business.

SENSEI is an ultra-miniature robotic gamma probe for intracavital use that is able to provide radiopharmaceutical-based surgical guidance by enabling the intra-operative detection of cancer in real time.

The acquisition will further enhance and differentiate Telix’s innovation position and product depth in urology by enabling targeted radiation to be harnessed across the entire continuum of cancer patient care, from initial diagnosis and staging to surgical intervention and therapeutic use, the company says.

Plus, SENSEI has marketing authorisation in the United States, having been registered with the US Food and Drug Administration (FDA) since September 2020 and has a Conformité Européenne (CE) Mark for use in the European Economic Area (and other applicable countries) since January 2021 for intra-operative detection of sentinel lymph nodes and cancer metastasis via the lymphatic system, supporting broad clinical use of the product.

WiseTech Global (ASX:WTC)

M&A is the name of the game for the logistics platform, with WTC picking up Envase Technologies for US$230 million and Blume Global for US$414 million – two leading North American landside logistics businesses – in Jan and Feb respectively.

North America is the world’s largest domestic logistics region, and Blume manages intermodal containers and chassis on behalf of six of the seven Class 1 US railroads, ocean carriers and other intermodal equipment providers including global freight forwarders and Beneficial Cargo Owners (BCOs).

Blume is expected to generate FY242 revenues in the range of US$65 million to US$70 million representing annual growth of 45% to 55%.

Envase is also in the USA and offers solutions for carriers to automate and provide visibility for the movement of containers across all aspects of import and export haulage operations from port and rail terminals to destination.

Envase is expected to generate approximately US$35 million of revenue for the calendar year 2023 with an EBITDA margin in the low to mid 20% range.

Aristocrat Leisure (ASX:ALL)

In May, Aristocrat announced plans to acquire NeoGames for $1.8 billion (enterprise value).

NeoGames’ suite includes content, proprietary technology platforms and a range of value- added services across iLottery, iGaming and Online Sports Betting (OSB), with around 1,100 staff and more than 200 customers across more than 50 regulated markets.

The company said the acquisition delivers on its online Real Money Gaming (RMG) strategy and accelerates growth.

BXN, TLX, WTC and ALL share prices today:

What about international expansion via distribution deals?

Quickstep (ASX:QHL)

Last week the aerospace composite business named Wichita, Kansas as the chosen location of its first US-based engineering and manufacturing facility – as part of its US ‘go-to-market’ strategy.

Wichita has a strong aviation heritage and is home to some of the world’s greatest aviation brands including Textron Aviation, the manufacturer of Beechcraft and Cessna aircraft, Airbus, Bombardier and Spirit AeroSystems.

“Wichita is a globally recognised centre of excellence for aerospace technology, the location itself will offer significant business expansion opportunities,” VP Steve Osborne said.

“Our existing presence in the US is already presenting greater certainty over new business opportunities and opening many more potential customer and contract relationships.

“This is an exciting time for Quickstep Inc and growth in the US will become a defining feature of overall future growth across the group.”

MGC Pharmaceuticals (ASX:MXC)

In April, the cannabis company announced its CannEpil Investigational Medicinal Product (IMP) for refractory (or drug-resistant) epilepsy was available in the United Kingdom via Named Patient Request, and available to be prescribed by doctors on The General Medical Council (GMC) specialist register across the UK.

And in May, CannEpil was successfully imported and received by its first patients in the United Kingdom through the ‘I AM Billy Foundation’, supporting the NHS’s Refractory Epilepsy Specialist Clinical Advisory Service (RESCAS) study.

The company is confident other key territories will shortly follow the UK’s lead, and is well placed with its Malta production facility being granted formal EU-Good Manufacturing Practice (GMP) certification in May – a certification also recognise by the USA Food and Drug Administration (FDA).

Forbidden Foods (ASX:FFF)

The company bolstered its presence in the US market in June, signing distribution deals with Gourmet Merchants International and McLane Company – both of which are expected to accelerate the momentum for FFF’s leading Blue Dinosaur product range into retail outlets in the US.

GMI is a leading distributor that has strong relationships with gourmet, natural and independent grocery markets, focusing on retailers in San Diego to Santa Barbara in California.

Meanwhile, McLane Company is one of America’s largest distributors, servicing convenience stores, mass merchants and chain restaurants – and is wholly owned by Warren Buffett’s Berkshire Hathaway.

RooLife Group (ASX:RLG)

This month ecommerce player RooLife Group said its AULife sales channel partnership in China is already delivering the goods within its first two weeks, with sales and orders of approximately $440,000 in two new lucrative product segments – milk powder and dairy food products – secured.

This follows initial sales revenue of approximately $190,000 of Australian milk powder products achieved in the last week of June.

So far in July, sales orders of approximately $250,000 for dairy food products have been received through new sales channels established with AULife.

Neuren Pharma (ASX:NEU)

In March, Neuren announced that its North American partner Acadia Pharma received a “historic” US FDA approval of DAYBUE (trofinetide) – making the drug the first and only approved treatment for Rett syndrome in the world.

Neuren is eligible to receive ongoing royalties on net sales of trofinetide in North America, plus milestone payments of up to US$350 million on achievement of a series of four thresholds of total annual net sales, amongst other payments.

And this month the company announced Arcadia’s exclusive licence for trofinetide in North America had been expanded to a worldwide licence, entitling Neuren to receive US$100 million up-front, plus additional potential milestone payments of up to US$427 million, plus royalties – that’s on top of the North American milestone payments and royalties.

QHL, MXC, FFF, RLG and NEU share prices today:

At Stockhead we tell it like it is. While Halo Technologies, Melodiol Global, Incannex Healthcare, Bioxyne, Quickstep, MGC Pharmaceuticals, Forbidden Foods and RooLife Group are Stockhead advertisers, they did not sponsor this article.