'Big BioPharma needs growth,' says Wells Fargo analyst Mohit Bansal in a research note that anticipates a pick-up in smaller deals in the sector.
The pace of biotech deals is likely to pick up, but investors should think about smaller targets, said Wells Fargo analyst Mohit Bansal. Bansal called out both enticing valuations for small- and mid-cap biotech companies, which are now trading at an enterprise value of about one times cash, on average, and a tough regulatory environment for his view.
Past recessions have prompted other combinations in the sector like Pfizer's acquisition of Wyeth, Merck's tie-up with Schering-Plough and Roche's purchase of Genentech, which all occurred in 2009, he said. Adding to pressure is a dearth of IPOs and follow-on equity offerings this year that could prove to be another catalyst as some smaller biotechs will start to run short on cash later in 2022.
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