Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

If biotech in 2016 resembles anything, it's a wounded antelope. And those attract hyenas.

Biotech is starting to look cheaper
Source: Bloomberg

The Nasdaq Biotech Index is down 14 percent so far this year and 30 percent from its peak last July. For pharma companies with deep pockets, along with a lucky few big and cashed-up biotechs, now is a rare opportunity to find a biotech bargain after a five-year run in which the NBI rose more than 250 percent. Companies that would have been unaffordable last summer have been cut in half in some cases. Battered biotechs surely want to resist lowball offers, but the longer this downturn goes, the less choice they might have. 

Many of the worst-performing firms have extra-bad news that might make them rather less appealing targets. For example, Sanofi backed out of a partnership with MannKind to sell its inhaled insulin earlier this year, sending MannKind into penny stock territory. Clovis Onclology plunged in November after disappointing data on a cancer drug. But a lot of these losses, which average 17.5 percent across the index year-to-date, are often independent of real negatives. They come from general market malaise, in which no news is bad news in the biotech world. 

Winter Blues
Biotech firms that have seen the biggest share price dives since the Nasdaq Biotech Index's July peak
Source: Bloomberg

"Tottering stock makes 'X' a takeover target” is among the hoariest of M&A clichés. It was trotted out (again!) for Twitter on Wednesday. But it rings particularly true in the drug world, where companies are constantly trying to refill and restock their pipelines, to find the next potential blockbuster or break into new types of treatment, and where there's been a trend toward buying another firm's research rather than paying for your own.

As an example of what small biotechs may fear, take Acorda Therapeutics' $363 million bid this week for Finnish Parkinson's drug developer Biotie. Yes, the offer represents a more than a 90 percent premium on Biotie's closing price last week. But that's only because the share price was down 45 percent from its summer high before the deal was announced. People who bought at the top would make a meager return on this deal. A Finnish investor who held the stock for three years would net around a negative 33 percent return at the current, deal-inflated price. It'd be one thing if the company had reported bad news recently. But the last major development for the company was the start of late-stage trials on its core drug in July. 

Others are more eager for a deal. New Jersey based drugmaker Medicines Co. is reportedly trying to sell itself now, for example. It seems like awful timing, as my colleague Brooke Sutherland wrote Wednesday. The company has enough cash to try to wait out the slump -- likely the smart move for any company with promising assets and any ability to survive on current funds. 

But some might not have the luxury of waiting. Drug development is expensive, and only gets more so in its latter stages. Many of the companies in the NBI are years away from getting a drug on the market. In recent years, early stage companies have easily tapped equity markets to raise money to fund clinical programs for years at a time. Clovis did a $316 million offering last year, and Bluebird Bio offered $500 million in a mega-secondary back when it was trading closer to $200 than $20. That well looks to have run dry. A wave of secondary offerings at the start of this year priced at massive discounts. Sentiment and stock prices are even lower now.

Ordinarily, after the JPMorgan health care conference, biotechs use positive buzz from the confab to sell more stock. In the week after last year's conference, seven companies announced offerings raising nearly $2 billion. This year, there's been just one offering -- for $30 million. In this environment, firms that desperately need cash will be among the most attractive takeover targets.

Potential acquirers are in a somewhat better state; larger companies have been less affected by the downturn. The NYSE's pharma index is down a relatively mild 5.22 percent this year. The four biggest firms in the NBI by market cap are down an average of 6.73 percent -- less than half the decline in the broader index. There's a long list of companies with substantial cash piles. And while there's less of a chance of megadeals, restocking the pipeline on the cheap never goes out of style.  

Rolling in it
If there's a fire sale in biotech, these companies might be the buyers.
Source: Bloomberg

If this downturn goes on, companies might get scooped up at valuations that would have been laughed off less than a year ago. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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Mark Gongloff at