M&A Boosts Biotech Stocks For Third Day

Gilead Sciences (GILD) and bluebird bio (BLUE) Both Soar Today 

Biotech Sector Back to 2017 Highs

The prospect of more M&A boosts biotech stocks for a third day this week. The large cap based IBB was up 1.87% today and  6.48% over five days to $323.76 approaching its YTD high of $327.34. The equal weight small cap driven XBI did better up 1.2% today and 8.82% over five days. A double top near $81.56 comes into play this week with this ETF up 37.79% YTD.

The acquisition of Kite Pharma (KITE) by Gilead Sciences (GILD) for $11.9B was the catalyst announced on Tuesday morning. Analysts have been largely favorable for the deal citing breakthrough CAR-T technology with a broad portfolio for oncology for KITE. Gilead (GILD) was up another 7.25%  today to $81.23. Gilead Sciences has been one of our top Rayno portfolio picks up 13.43% YTD but required a lot of patience waiting for a deal to diversify the Company beyond its leadership for HCV and HIV therapies.

The sector overall has become re-energized this month despite a lot of criticism about high drug prices for oncology and also mentioned in the case of potential CAR-T products. However the expectations for T-cell therapies are very high for a short-term cure hence lower treatment costs in the long run for cancer patients.

The green screen prevailed today with many analysts offering their calls for the next mega deal. This is not my buyout list rather we expect the following companies to be “mentioned” for future M&A, mainly mid-caps that have near term regulatory approvals or strategic fit:

  • Agios Pharmaceuticals(AGIO) up 3.05% today,Market Cap $2.99B
  • Biomarin Pharmaceuticals (BMRN) up 5.63% today, Market Cap $15.36B.
  • bluebird bio (BLUE) up 9.86% today, Market Cap $5.13B.
  • Clovis Oncology (CLVS) up 4.57% today, Market Cap $3.61B.
  • Incyte Corporation (INCY) up 10.64% today,Market cap $28.44B.
  • Seattle Genetics (SGEN) ip 1.08% today, Market Cap $7.12B.
  • Portola Pharmaceuticals (PTLA) up 0.48% today,Market Cap $3.5B.
  • Vertex Pharmaceuticals (VRTX) up 2.2% today, Market Cap $39.4B.

We will update this short list in the future along with pipelines. Obviously there are many smaller cap deals to be done.

Here is our biopharma valuation model from 2015 prior to the July 2015 biotech bubble. Two of these companies were acquired: Medivation and Phramacyclics.


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