Merrill Lynch report says biotechnology antibodies in demand

By Lisa Kerner

Erie, Pa., Feb. 21 - The trend of numerous antibody licensing deals and acquisitions in 2005 is expected to continue or even accelerate during 2006, according to a report from Merrill Lynch analyst Peter Welford.

Merrill includes two antibody companies, Genmab and PDL BioPharma, in its global biotech top picks for 2006. Genmab was also a top pick in 2005.

The analyst is raising the Genmab price objective to Danish krone 205 from krone 150 per share based on increased confidence in HuMax-CD20. During 2006, Merrill expects Genmab to partner at least one of HuMax-CD20 and/or HuMax-EGFr. These licensing deals could represent catalysts for the stock and crystallize shareholder value, according to the report.

Following Amgen's mid-December acquisition of Abgenix, the analyst expects the potential for further consolidation to continue to "underpin the valuations of antibody stocks during 2006."

Big pharmaceutical/biotechnology companies may acquire antibody companies to obtain pipeline products, buy back future royalty streams on previously licensed antibodies, or gain access to the antibody technology, the report stated.

Merrill suggests significant upside potential for the antibody stocks Genmab, CAT and PDL BioPharma.

Antibodies are the most commercially successful biotech products, due in part to the lower risk of unexpected safety issues and specific mechanism of action, compared to small molecule drugs, according to the Merrill Lynch report.

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