Skip to Content
US Videos

Acquisitions Targets Among Drugmakers

We think the market underappreciates some large pharma and biotech names.

Mentioned: , , , , , , ,

Karen Andersen: We've published our annual drug pipeline report, including a detailed analysis of the 19 largest branded pharma and biotech names in Morningstar's coverage. While U.S. pricing pressure is an overhang, most of these firms can support wide moats as a result of their ability to generate new drugs to replace those losing patent protection. We see these firms as roughly 10% undervalued on average. We think the market underappreciates Roche's strong position in immuno-oncology, and the Celgene acquisition gives undervalued Bristol access to strong cash flows through 2022 and nine potential blockbusters. Biogen's deep neurology pipeline doesn't appear to be fully valued by the market, and Biomarin has a solid rare-disease drug foundation poised to expand in 2020.

Large-cap drug firms feed their pipelines with internal research as well as acquisitions, such as Bristol's pending acquisition of Celgene. We think Pfizer, Merck, and J&J are best positioned to make acquisitions, given several logical targets, solid financial positioning, and strong share prices. Biogen and Biomarin look like targets, given their undervalued shares and focused portfolios. Pfizer could con­sider buy­ing Bris­tol after the Cel­gene acquisi­tion closes if val­u­a­tions re­main com­pelling, as this would greatly ex­pand its oncology port­fo­lio and pipeline. We also see Merck and Lilly as a compelling combination, as Lilly would give Merck diversification away from immune-oncology blockbuster Keytruda, and there is a fit between their oncology and diabetes portfolios.

Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.