Clinical News and M&A Boost Biotechs

Biotech stocks continued their seasonal strength with many winners in the mid-cap sector. Our index of 33 mid-cap stocks was up 2.7% which is unusually strong. Leaders were Incyte (INCY), Martek Biosciences (MATK) and the ETF XBI which owns a position in large cap Genzyme (GENZ) up 2.3%. Reuters put out an article calling for more M&A activity in healthcare. Many analysts have forecasted increasing M&A activity in biotech as both large cap pharma and biotech needing to buy pipeline and technology from mid and small caps.Yesterday Gilead (GILD) announced the purchase of Arresto Biosciences for $225M for experimental drugs in cancer and lung disease (idiopathic pulmonary fibrosis).

Healthcare sector ripe for more deals in 2011 | Reuters

Incyte Pharmaceuticals (INCY $16.50) up 8.8%

The Company announced positive top -line results from their pivotal Phase III clinical trials of INC24 in patients with myelofibrosis (MF). MF is a blood cancer where abnormal bone marrow stem -cells are produced resulting in growth of connective tissue fibers. A double-blind, placebo controlled Phase II study of 306 patients was conducted under a Special Protocol Assessment Agreement. The response rate was 42% with high levels of statistical significance also achieved for secondary endpoints.An NDA is currently being prepared for a drug launch

Martek Biosciences(MATK $31.61) up 35%

Martek shares soared today on a buy-out offer from Dutch Group DSM, the worlds largest vitamin maker, for $1.1B in a diversification move. Martek has a leading position in healthy natural ingredients for the baby food market as well as health and wellness. The Company is a leader in fermentation technology and products derived from microalgae. Total product sales were $435M for the 12 mo. period ending Oct 31,2010 with earnings of 83 cents a share down from $1.22 a year earlier.

XBI $64.38 is up 2.35% at its 52 week high.

The ETF XBI owns 3.4% of MATK and other mid-cap biotechs that have been on “hit lists” as acquisition targets : Enzon(ENZN), Regeneron (REGN) and Vertex(VRTX). All of these stocks are up 2%+ today.

Genzyme (GENZ $71.28) up 2.34%

The Genzyme /Sanofi deal chat perked up today on renewed  speculation that GENZ is willing to talk to Sanofi-Aventis (SASY.PA) about the $69 ($18.5B) tender offer price extended to January 21,2011. No other offers have surfaced for the Company.  Genzyme has recently been selling off non-core businesses such as the sale of genetic testing and diagnostic businesses for $925M and $265M respectively. Trading volume in the January 70,72.5 and 75 call options picked up today.


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