Purchases on Recordati. Biotech sector in turmoil after latest M&A deals

(Il Sole 24 Ore Radiocor)- Purchases on Recordati, which is among the best stocks on the Italian Stock Exchange.

The stock market is beginning to bet that the company may be working on some extraordinary transaction, especially after the announcements in the biotech sphere in the last few hours, which will revive a sector that has been under pressure for months. In particular Sanofi bought Blueprint Medicines for $9.1 billion in cash. The acquired company, which developed the only approved treatment for a rare immunological disease, was valued at a 27% premium to Friday's price. In addition, Bristol-Myers Squibb signed a deal with BioNTech, investing $3.5 billion for 50% of an investigational cancer immunotherapy drug. The total value of the deal may reach $4.6 billion, against an earn-out of $1.1 billion.

Intermonte pointed out that "both deals signal a resurgence of M&A's activity in biotech, after a complex phase marked by depressed valuations, limited capital and a slowdown in deals, in an environment made more challenging by high interest rates and uncertainties related to US drug pricing policies. They also confirm that, with solid assets, the sector remains attractive and capable of generating value, albeit more selectively". For Recordati, the stockbroker noted, business development and M&A activities remain central strategic levers, even if, as emerged during the recent Investor Day, management does not believe transformative operations are necessary to reach the target of doubling revenues by 2030 (compared to the 2.3 billion estimated for 2024), which would imply an average annual growth of 14% compared to the indications given for 2027 to reach a revenue level of 3.1 billion. "Historically, about half of Recordati's revenue growth (+9% in 2014-24) has been generated through extraordinary transactions," recalled Intermonte's analysts, who meanwhile reiterated their 'Outperform' recommendation on the house's shares, with a price target of €69. Equita believes that in the medium term the company's financial leverage is expected to remain in the range of 1.7-2 times, with a maximum tolerance of up to 3 times in the case of high quality acquisitions. "In the latter case," the experts explained, "Recordati would have a firepower to spend of 1.1 billion euros".