US tax reform has sparked a fresh wave of M&A in the biotech sector, representing a trend that Biotech Growth Trust manager Geoff Hsu believes has further to run and hopes to exploit after a difficult year for the investment trust.

Hsu notes that M&A in the sector was lower than expected last year, as a result of uncertainty surrounding the US government’s drug policy and question marks surrounding tax reform. However, now there is greater clarity on both fronts, consolidation activity has increased.

‘The 2018 run rate appears to have picked up and is on par with the heady days of 2014-15,’ Hsu said.

In part, he believes this is down to the significant amounts of cash that drug companies have available following the 15.5% one-time repatriation tax that has been applied to cash held overseas. This cash has been unlocked for acquisitions, share buybacks and dividends. Biotech companies have also benefited from the lowering of US corporation tax from 35% to 21%.

With this climate heating up, some of the smaller biotech companies are in direct focus heading into the rest of this year. Potential M&A Candidates? Time will tell but for now, there are a number of smaller enterprises making big waves in the market this week.

GT Biopharma (GTBP)

GT Biopharma (GTBP) announced a Material Transfer Agreement between a Major Pharmaceutical Company and Dr. Daniel Vallera, Director, Section of Molecular Cancer Therapeutics at the Masonic Cancer Center, University of Minnesota. This Major Pharmaceutical Company will be supplying a formulation of their multibillion-dollar, widely prescribed oncology drug, which has been approved for use in several hematologic malignancies to Dr. Vallera to be used in this study.

The company’s OXS-1550 targets two antigens on cancer cells and contains a cytotoxic payload, which increases the probability that it will kill the cancer cells. Initial pre-clinical work performed by Dr. Vallera suggests a much greater effect when OXS-1550 is given in combination with this established oncology drug.

Shares of GT Biopharma have been in an uptrend for the last few weeks. In July GT shares were under $1.50 and Thursday’s session had GT Biopharma hitting highs of $2.18.

Xenetic Biosciences Inc (XBIO)

Xenetic Biosciences, a biopharmaceutical company which focuses on the research and development of biologic drugs and novel oncology therapeutics, recently received an update from its partner, Shire Drug (SHPG), SHP656, which treats Hemophilia A, did not meet the study’s primary objective, but Xenetic’s promising PolyXen technology, licensed to Shire, was further validated in this trial.

Xenetic is a thinly traded, very small biopharmaceutical company of less than 10 employees. The company is located in Lexington, MA, and is right across the street to one of the leading drug companies in the world, Shire. This morning, Xenetic shares were halted due to volatility but continue to trade higher during the morning session.

Aytu BioScience, Inc. (AYTU)

Aytu BioScience, Inc., a specialty pharmaceutical company focused on global commercialization of novel products addressing significant medical needs, today announced the accelerated launch of ZolpiMist™, an oral spray formulation of zolpidem tartrate (brand name Ambien®) and the only FDA-approved oral spray prescription sleep aid.

According to the company, the Aytu BioScience sales force begins promoting ZolpiMist to U.S. clinicians today in the domestic $1.8 billion non-benzodiazepine prescription sleep aid market. The earlier than expected launch of ZolpiMist was made possible by the company taking early delivery of an initial supply of commercial ZolpiMist inventory.

Just to give an idea of market size, for the twelve months ending December 31, 2017, there were over 43 million prescriptions of non-benzodiazepine sleep aids prescribed in the U.S., representing sales of $1.8 billion. Zolpidem tartrate is the most commonly prescribed sleep aid, with more than 30 million prescriptions of various forms of zolpidem tartrate prescribed annually in the U.S.

A Bigger Picture Ahead

Daniel Koller, investment director of BB Biotech, Europe’s largest listed healthcare fund based in Switzerland, says with US political pressures receding the biotechnology sector is getting back to what it does best: developing innovative treatments and buying and selling companies with the best assets.

Some of the biggest names in the industry could once again be on the hunt for the next opportunity in biotech and if you weren’t familiar, here are 7 of the top organizations that could be on the hunt:

Johnson & Johnson – NYSE: JNJ

Pfizer – NYSE: PFE

Roche – OTCQX: RHHBY

Novartis – NYSE: NVS

Merck & Co. – NYSE: MRK

AbbVie – NYSE: ABBV

Amgen – NASDAQ: AMGN

MIDAM VENTURES LLC., a Florida Corporation has been compensated $200,000.00 by GT Biopharma Inc. for a period beginning July 16, 2018 and ending August 17, 2018 to publicly disseminate information about (GTBP). Midam owns zero shares. We may buy or sell additional shares of (GTBP) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.