Jefferies sees promising M&A targets in biotech sector amid stabilizing market

Jefferies identifies biotech M&A targets with commercial-stage assets, citing Akero Therapeutics and Scholar Rock as promising, anticipating increased deal volume in the second half of the year after market stabilization. Separately, Health and Human Services Secretary Robert F. Kennedy restructured the Advisory Committee for Immunization Practices (ACIP), raising concerns among BMO Capital analysts about potential risks for Merck, Pfizer, and BioNTech, leading to market declines in Moderna, Pfizer, and BioNTech shares.

Analysis

Jefferies projects an uptick in biotechnology M&A activity for the second half of the year, driven by market stabilization and adjusted valuations, specifically highlighting Akero Therapeutics (NASDAQ:AKRO) with a $2-3 billion sales potential from its NASH candidate and Scholar Rock (NASDAQ:SRRK) with an impending September 22 PDUFA date for its SMA treatment as strong candidates. This optimism is supported by total deal value for 2025 already approaching $36 billion for transactions exceeding $500 million, nearly matching full-year 2024 levels despite being only midway through the year, and a recent $9.5 billion biotech deal signaling market improvement. Jefferies notes that while market volatility and policy uncertainty, including sector-specific tariffs and drug pricing, had suppressed M&A, the industry appears to have passed "peak negativity" with moderated rhetoric. Concurrently, the Health and Human Services Secretary's restructuring of the Advisory Committee for Immunization Practices (ACIP) by appointing eight new members has introduced uncertainty for vaccine manufacturers. Analysts from BMO Capital highlighted potential risks for Merck, Pfizer (NYSE:PFE), and BioNTech (NASDAQ:BNTX) stocks, considering it more of a headline risk, while Cantor Fitzgerald maintained a Neutral stance on Pfizer with a $24 price target due to potential ACIP guideline changes affecting its Comirnaty vaccine. This regulatory development has contributed to share price declines for Moderna (NASDAQ:MRNA), Pfizer, and BioNTech, reflecting investor concerns over potential disruptions to vaccine approvals and sales, further compounded by Pfizer's ongoing, non-committal discussions with the Trump administration regarding drug pricing policies.

Key Decisions for Investors

• Investors should consider exploring specific biotechnology companies with de-risked or commercial-stage assets, such as Akero Therapeutics and Scholar Rock, which Jefferies identifies as potential M&A targets amidst an anticipated increase in deal volume.
• Holders of shares in major vaccine manufacturers, including Pfizer, BioNTech, and Moderna, should closely monitor developments from the newly restructured ACIP and ongoing drug pricing discussions, as these could significantly impact future revenues and market sentiment.
• A selective investment strategy within the broader healthcare sector may be prudent, potentially favoring biotech companies poised for M&A while exercising caution with firms highly exposed to evolving vaccine policies and drug pricing regulatory uncertainties.