New York, New York (NetworkNewsWire) – Merger and acquisition
activity has played a massive role in the formation of the
pharmaceutical industry as it exists today. Historic deals, like
Pfizer’s 2009 purchase of pharmaceutical giant Wyeth for $68
billion and Glaxo Wellcome’s purchase of SmithKline Beecham for $76
billion in 2000, have created a consolidated market that’s often
driven forward by the innovations of smaller companies.
Lexaria Bioscience Corp. (CSE: LXX) (OTCQB: LXRP)
(LXRP
Profile), with its promising intellectual
property portfolio focused on revolutionizing the delivery of a
variety of molecules to the human body, is well-positioned to
continue on this history of acquisition in the pharmaceutical
space, following in the footsteps of companies like Derma Sciences,
Inc., which was acquired by Integra LifeSciences Holdings
Corporation (NASDAQ: IART) for approximately $200 million,
and CoLucid Pharmaceuticals, Inc., which was acquired by
Eli Lilly and Company (NYSE: LLY) in a landmark
$960 million deal. With analyst rumblings pointing toward
additional high-profile buyouts of industry upstarts like
ACADIA Pharmaceuticals, Inc. (NASDAQ: ACAD) and
Incyte Corp. (NASDAQ: INCY), the time to cash in
on the next Big Pharma acquisition could be at hand.
While the acquisition frenzy in pharmaceuticals spans the
entirety of the colossal global industry, few subsectors have
demonstrated more potential for promising upstarts than the
medicinal cannabis market. Projected by Arcview Market
Research to eclipse $20.2 billion in North American sales by
2021, the legal marijuana industry, including both medicinal and
recreational markets, is expected to create more than a quarter of
a million jobs by 2020, outpacing economic mainstays like
manufacturing, utilities and government positions. This forecast
expansion has already set the stage for a number of industry
acquisitions, many of which have taken place in the soon-to-be
federally legalized Canadian market. One such is example Canopy
Growth Corp.’s April acquisition of
rTrees Producers Limited, a late-stage Access to Cannabis for
Medical Purposes Regulations (“ACPMR”) applicant. The rTrees
acquisition brought a 90,000 square foot indoor growing facility
with considerable room for expansion under Canopy Growth’s already
sizable umbrella, expanding upon the market presence of the first
Canadian cannabis company to achieve a $1 billion market
valuation.
Other industry players have followed Canopy Growth’s lead. In
late July, Aurora Cannabis announced plans to make a strategic
investment in Hempco Food and Fiber, Inc., one of the world’s
largest producers of industrial hemp products. Earlier that same
month, Canadian cannabis producer Invictus MD Strategies Corp.
invested $5.5 million in AB Ventures, Inc. to fund the costs of
licensing approval under the ACMPR and construction of related
production facilities. Similar M&A deals were recently
completed by Aphria, which invested $11.5 million in
endocannabinoid-focused pharmaceutical company Scientus Pharma in
mid-August, and Maricann Group, Inc., which recently announced its
acquisition of biotech company NanoLeaf Technologies for total
transaction consideration of C$40.1 million. The NanoLeaf
transaction is particularly intriguing for prospective investors of
Lexaria
Bioscience, as NanoLeaf possesses “the licensing rights to a
number of globally patented technologies that provide proven
pharmaceutical, nutraceutical, cosmetic and functional beverage
drug delivery formulations.”
This recent industry activity highlights the rising demand for
innovative and marketable offerings targeting the burgeoning
cannabis sector, but they fail to capture the scale of a potential
Lexaria Bioscience transaction. This is because of
the wide-ranging applications of Lexaria’s technology platform. To
date, the company has noted potential applications for its lipid-based
molecular delivery technology that include NSAIDs, nicotine,
vitamins and cannabinoids – applications that are supported by 19
currently-pending patents filed in more than 40 countries.
According to biotech analysis firm EvaluatePharma,
the global market for NSAIDs was valued at $11.4 billion in 2014.
Meanwhile, the global market for vitamins in on course to reach
$9.3 billion by
2020, the market for alternative nicotine delivery technologies
is at an all-time high following recent FDA
proposals, and consumer sales of cannabinoids are expected to
reach $2.1 billion by
2020. All told, the market potential for Lexaria’s flagship
platform could be huge.
It has been precisely this potential, alongside numerous
clinical, financial and IP developments, that has driven Lexaria’s
growth in recent months. On July 18, the company announced
(http://nnw.fm/wI0LB) that the Australian Patent
Office granted a patent protecting its method of improving
absorption, speed of onset and taste of cannabinoid active agents
in edible products. This milestone was particularly noteworthy in
that it followed Lexaria’s announcement
of a $1 million combined R&D program aimed at examining
improvement in absorption offered by its technology for several
groups of molecules, including NSAIDs, nicotine, vitamins and
cannabinoids. Just last week, the company took a major step toward
maximizing on the value of its patented technology by announcing
the world’s first
clinical study of human volunteers of CBD within its high
absorption TurboCBD™ product.
“Lexaria is proud to be advancing our collective knowledge of
the benefits of CBD specifically showcasing the benefits of
Lexaria's unique patented delivery technology,” Chris Bunka, CEO of
Lexaria, stated in the news release announcing the study. “Results
will advance Lexaria's ability to custom design products that
increase the leading performance our technology already offers to
customers.”
Strengthening Lexaria’s status as a promising acquisition target
is its current cash position. The company has outlined a number of
moves to bolster its balance sheet in recent months, most notably
its $1 million raise from warrant exercise originally announced on
May 19. In total, Lexaria raised over $3 million in the past nine
months in a strategic effort to capitalize on the growth of both
the pharmaceutical industry as a whole and, perhaps more
importantly, the cannabis sector. With funding in place through
2019, according to Bunka, Lexaria has the IP and the capital needed
to properly demonstrate the marketability of its lipid-based
delivery technology while working with prospective licensees and
resellers to maximize returns for early investors.
Recent acquisitions in the pharmaceuticals industry highlight
the potential upside Lexaria presents to the investment community.
Derma Sciences, Inc., for example, operated as a tissue
regeneration company at the forefront of research and innovation
for the management of acute and chronic wounds prior to its
acquisition
by Integra LifeSciences Holdings Corp. (NASDAQ:
IART) in January of this year. In a slide deck
issued following the acquisition, IART noted Derma’s “line of
products with patented technologies,” including multiple offerings
targeting the burn and wound management market, as a key driver for
the transaction. Insights from medical technology analysis firm
MedMarket
Diligence, LLC suggest that this market is currently growing at
a rate of 3.1 percent annually, providing a fertile runway for
future sales growth in the space. For comparison, the cannabinoid
market, which is just one of many potential indications for
Lexaria’s molecular delivery technology, is expected to climb
700 percent
from 2016-2020.
Eli Lilly and Company’s (NYSE: LLY) March
acquisition
of CoLucid Pharmaceuticals, Inc. serves as another example of the
aggressive M&A strategy employed by some of the most
recognizable names in Big Pharma. At the time of the deal, David R.
Ricks, president and chief executive officer of Eli Lilly, noted
that the purchase would “enhance Lilly's existing pain management
portfolio and add a potential near-term launch to [its] late-stage
pipeline.” This late-stage addition is lasmiditan, an oral tablet
that’s currently being evaluated in phase III clinical trials for
the acute treatment of migraine headaches in adults. Lasmiditan was
actually originally developed by Eli Lilly, but it was licensed to
CoLucid in 2005 as part of Lilly’s strategic move away from the
pain management market. On top of highlighting the evolving
strategies of Big Pharma players to capitalize on industry trends –
including cannabis
painkillers and related cannabinoid products – the CoLucid
acquisition’s focus within the migraine drug market falls well
within earshot of Lexaria’s diverse portfolio of potential
applications for its lipid-based delivery technology.
In both of these cases, high-dollar acquisitions were fueled by
strong intellectual property positions targeting inviting markets
within the pharmaceutical industry. This trend rings true when
studying other upstart companies that could be in line for big time
buyouts. A buyout of ACADIA Pharmaceuticals, Inc. (NASDAQ:
ACAD) has been rumored for months, with the company having
reportedly received an
offer from AstraZeneca in February and interest from Pfizer
related to its lead product NUPLAZID®, the only significant
compound in the company’s development pipeline. Approved by the FDA
for the treatment of hallucinations and delusions associated with
Parkinson’s disease, NUPLAZID® is currently in late stage trials
for similar symptoms in Alzheimer’s and schizophrenia, giving it
the potential to address a massive and growing global market. The
company’s stock closed at $36.16 on September 1, and reports from
Seeking
Alpha suggest that ACADIA’s management team is pushing for a
substantial premium for a potential buyout in the range of “$55 to
$60 a share.”
Incyte Corp. (NASDAQ: INCY) is another prime
buyout target, as reported in an editorial piece published by
MarketWatch.
“Incyte is a throwback to what biotech companies were meant to be,”
RBC Capital Markets analyst Simos Simeonidis told MarketWatch.
“It’s built on ‘great science’ that has helped it develop several
drugs, and it continually reinvests in its own research.” Incyte’s
main product, Jakafi, is an FDA-approved medication used to treat
rare blood cancers. Back in March, analysts speculated
that Gilead was close to an agreement to acquire Incyte. Although
that deal has not yet come to fruition, the Delaware-based company
offers a combination of growing revenues and strong R&D
programs that makes it a solid acquisition target, particularly as
disappointing clinical data from competing trials strengthen the
revenue outlook of Incyte’s leading product.
As demonstrated by recent industry activity, Big Pharma’s
biggest names stay active on the M&A front, especially as it
relates to first-of-their-kind advancements in promising markets.
Continued interest in the pipelines of upstarts like ACADIA
Pharmaceuticals and Incyte Corporation paints an intriguing picture
as Lexaria Bioscience progresses with the world’s
first clinical study of CBD within its high absorption TurboCBD™
product. With a strong balance sheet and an increasingly diverse
and wide-reaching IP portfolio targeting some of the industry’s
highest growth verticals, Lexaria should be on the radar of any
investor hoping to cash in on the M&A deal-making
bonanza that could be on the horizon.
For more information on Lexaria Bioscience
Corp., please visit: Lexaria
Bioscience Corp. (CSE: LXX) (OTCQB: LXRP)
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