To The Moon

The tide of drug patent expiration is surging, and big drugmakers are panicking. In order to consolidate their own research drugs and product portfolios, pharmaceutical companies have gradually turned to mergers and acquisitions, and the enthusiasm for mergers and acquisitions in the biotechnology field will also heat up in 2023.

For example, $Pfizer(PFE)$ paid $43 billion for cancer drugmaker $Seagen(SGEN)$ , and $Merck(MRK)$ paid nearly $11 billion for inflammatory bowel disease Company $Prometheus Biosciences, Inc.(RXDX)$ , and $GlaxoSmithKline PLC(GSK)$ spent $2 billion to acquire specialty pharmaceutical company $BELLUS Health Inc.(BLU)$ .

With biotech stock valuations at multi-year lows and many large drugmakers still in need of additional revenue streams, the trend of biotech M&A is expected to continue for the foreseeable future.

If you want to take advantage of the opportunity, the following 3 biotech stocks are undervalued assets, which are very likely to become acquisition targets of giants.

1. $Madrigal Pharmaceuticals(MDGL)$

Weekly chart

Recently, resmetirom, a late-stage non-alcoholic steatohepatitis (NASH) drug candidate developed by Madrigal Pharmaceuticals Inc, received Breakthrough Therapy Designation from the U.S. Food and Drug Administration (FDA).

If the drug is approved, it is very likely to become the NASH drug with the highest market share, and Wall Street analysts also expect resmetirom's peak sales to be in the range of $2.5 to more than $9.5 billion. By comparison, Madrigal is currently worth less than $6 billion. Such a potential asset is the coveted target of big drugmakers.

2. $Amylyx Pharmaceuticals, Inc.(AMLX)$

Weekly chart

Relyvrio, developed by Amylyx Pharmaceuticals Inc, is the first FDA-approved drug for amyotrophic lateral sclerosis (ALS, or progressive freezing).

There are about 200,000 patients with ALS worldwide, and Wall Street thinks Relyvrio's annual sales will eventually exceed $1 billion. By comparison, the company is currently valued at nearly $2 billion. This breakthrough ALS drug has strong competitive advantages and huge commercial potential, so there may be more than one bidding company for Amylyx in the future.

3. $Aurinia Pharmaceuticals(AUPH)$

Aurinia Pharmaceuticals Inc's FDA-approved lupus nephritis (LN) drug, Lupkynis, could become a blockbuster drug, analysts said. So far, however, the drug's annual sales have fallen far short of expectations, prompting major shareholder MKT Capital to recently urge management to consider a strategic review and possible sale of the company.

If it is an acquisition, MKT Capital believes that Aurinia can obtain an acquisition price of around US$28 per share, which is as high as 149% compared to the current market price.