The buyout drama surrounding cancer drug maker Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) is really beginning to heat up, and it's offering investors an in-their-face reminder that rapid growth and a promising pipeline are rare and come only for a high price in the health care industry.
Amgen originally offered to purchase Onyx for $120 per share almost seven weeks ago, but quickly found that offered rebuffed by Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), who was intent on shopping itself around and holding out for a better price. With Amgen now upping its offer to $9.5 billion, or $130 per share, some of the more serious bidders are beginning to bow out of the fray.
One of the potential bidders that have decided to step aside is oncology and hematology powerhouse Novartis AG (ADR) (NYSE:NVS). According to a Bloomberg report, Novartis AG (ADR) (NYSE:NVS) chairman Joerg Reinhardt is capping any future acquisition target at $10 billion, but he has no interest in acquiring Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) at such a steep price. That doesn't, however, mean Novartis AG (ADR) (NYSE:NVS) isn't on the prowl.
Novartis on the prowl Novartis AG (ADR) (NYSE:NVS) is certainly no stranger to the dangers of the patent cliff. Like many of the world's largest pharmaceutical companies, it's seen some of its biggest money-making drugs fall victim to generic competition. Last year saw the loss of high blood pressure medication Diovan, which had contributed $5.7 billion (about 10% of annual sales) in revenue in 2011, and breast cancer medication Femara. Looking ahead to next year, its blockbuster leukemia treatment Gleevec will lose its patent exclusivity.
New drugs are helping to curtail this steep revenue drop-off, including relapse-remitting multiple sclerosis drug Gilenya, which saw sales rise 66% in the second quarter over the year-ago period, and kidney cancer drug Afinitor, which delivered a 77% spike in sales. But, there's still nothing that can turn around an ailing pipeline quicker than an earnings-accretive acquisition.
Two companies on the radar Here are two companies that I feel would be a good fit for Novartis AG (ADR) (NYSE:NVS).
Incyte Corporation (NASDAQ:INCY) -- current market cap, $4.18 billion. Incyte Corporation (NASDAQ:INCY) would make a lot of sense as a potential buy candidate for Novartis AG (ADR) (NYSE:NVS) given that the two companies already have an ongoing licensing pact with FDA-approved myelofibrosis drug Jakafi. Under the current deal, Incyte Corporation (NASDAQ:INCY) has the rights to Jakafi within the U.S. with Novartis claiming worldwide rights to the drug everywhere else. Jakafi (known as ruxolitinib in testing) is also being studied as a treatment for polycythemia vera, pancreatic cancer, and solid/hematologic tumors.