) $8.3 billion deal, announced over the weekend, to take over
) triggered significant stock price appreciation in many mid-cap
firms in the space on Aug 25.
Recap of the Deal
Switzerland-based Roche is looking to strengthen its respiratory
portfolio through the impending InterMune buy. The offer price of
$74.00 per share represents a premium of 37.5% to InterMune's
closing price on Aug 22, 2014. In the event of the deal going
through, Roche's respiratory portfolio would be bolstered by the
addition of Esbriet (idiopathic pulmonary fibrosis). The drug,
already approved in Canada and Europe, targets a market with
significant unmet medical need (read our Detailed Coverage on the
Roche to Boost Respiratory Product Lineup with
The deal did not come as a surprise as rumors regarding it have
been doing the rounds for a couple of weeks.
Midcap Biotechs Ignited by InterMune Deal
The imminent takeover by a company as large as Roche caused the
shares of Brisbane, CA based InterMune to jump 35.1% to $72.85.
InterMune was not the only mid-cap biotech company to gain on the
news. New Haven, CT based Achillion Pharmaceuticals (
), Los Angeles, CA based Puma Biotechnology (
) and NY-based Intercept Pharmaceuticals (
) were the other notable gainers in the mid-cap biotech space on
Aug 25. All these stocks are also potential buyout candidates.
Achillion Pharmaceuticals, Puma Biotechnology and Intercept
Pharmaceuticals gained 10.45%, 5.14% and 2.59%, respectively, on
Aug 25. The surge in these mid-cap stocks led the NASDAQ
Biotechnology Index higher by 2.41% to end the trading session
yesterday at $2,850.43.
Shares of Achillion Pharmaceuticals have gained over 16% ever since
positive data from a phase II study
on its hepatitis C virus (HCV) candidate, ACH-3102. The HCV space
offers significant commercial potential. Consequently, the company
represents an attractive M&A target. Achillion
Pharmaceuticals holds a Zacks Rank #2 (Buy).
Puma Biotechnology also appears to be another attractive buyout
candidate. The company's share price has been on an uptrend ever
since it reported positive top-line results from a phase III trial
on its breast cancer candidate neratinib (PB272) last month (read
Puma Biotech Surges on Positive Results on
). Puma Biotechnology carries a Zacks Rank #3 (Hold).
Intercept Pharmaceuticals, a Zacks Rank #3 stock, has jumped
over 24% from the announcement of positive data from a phase II
study on obeticholic acid (OCA) for the treatment of nonalcoholic
steatohepatitis (NASH) earlier this month. This too marks Intercept
as a lucrative buy.
With many large companies eyeing smaller companies with promising
pipelines or products we believe that deals similar to the one
broached between Roche and InterMune will be common in the months
ahead. The substantial premium offered by Roche to buy a one-drug
company further highlights the importance attached to companies
with high potential products/candidates. We expect investor focus
to remain on the next such M&A deal in the biotech space.
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ROCHE HLDG LTD (RHHBY): Free Stock Analysis
INTERMUNE INC (ITMN): Free Stock Analysis
PUMA BIOTECHNLG (PBYI): Free Stock Analysis
INTERCEPT PHARM (ICPT): Free Stock Analysis
ACHILLION PHARM (ACHN): Free Stock Analysis
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