Market Overview

Dendreon, Pharmacyclics and Other Biotech Takeover Targets

Related BMY
UPDATE: Bristol-Myers Squibb Q3 Earnings Top Estimates
#PreMarket Primer: Friday, October 24: Ebola Fears Weigh On Markets
Apple Leads the Charge as Earnings Season Heats Up (Fox Business)

M&A in the biotech and pharmaceutical industries continues. Bristol-Myers Squibb (NYSE: BMY) just announced it has agreed to acquire Amylin Pharmaceuticals (NASDAQ: AMLN) for $5.3 billion. And Human Genome Sciences (NASDAQ: HGSI) has opened itself up to bidders, including GlaxoSmithKline (NYSE: GSK). Other rumored takeover targets in the sector include Arena Pharmaceuticals (NASDAQ: ARNA), Cubist Pharmaceuticals (NASDAQ: CBST), Dendreon (NASDAQ: DNDN), Pharmacyclics (NASDAQ: PCYC) and Vertex Pharmaceuticals (NASDAQ: VRTX).

Arena Pharmaceuticals

Shares of this biopharmaceutical company soared in May following FDA approval of a new diet pill. The stock reached a multiyear high in late June and is now more than 500 percent higher year to date. This San Diego-based company now has a market capitalization of about $2 billion. While the long-term earnings per share (EPS) growth forecast is more than 25 percent, the return on equity and the operating margin are both in negative territory. And the current share price has outrun the consensus price target of analysts. Also note that short interest on the stock is about 25 percent of the float. Yet, over the past six months, the stock has outperformed larger competitors such as GlaxoSmithKline, as well as the broader markets.

Cubist Pharmaceuticals

Cubist announced its five-year strategic goals in June and more recently shook up its top management. The company has seen its share price decline in the past 90 days, although it has popped more than 4% in the past week. The stock is more than 7% higher than at the beginning of the year. This Massachusetts-based biopharmaceutical company sports a market cap of about $2.5 billion. Investors may like the long-term EPS growth forecast of more than 18 percent, as well as the healthy operating margin. The consensus price target is more than 18 percent higher than the current share price. But short interest in the stock is about 15 percent of the float. Despite the pullback, Cubist still outperformed larger competitor Teva Pharmaceutical (NYSE: TEVA).

Dendreon

Seattle-based Dendreon focuses on cancer treatment, and its stock is trading about a buck above the 52-week low, after falling about 8 percent over the past week. The stock is more than 83 percent lower than a year ago, when shares went for almost $40 each. Dendreon's market cap is now down to about $1 billion. Its long-term EPS growth forecast is more than 27 percent, but like Arena, Dendreon has negative return on equity and the operating margin. And short interest in the stock is about 22 percent of the float. The stock has underperformed the broader markets over the past six months.

Pharmacyclics

Shares of this Sunnyvale, Calif.-based company soared following the release of blood cancer drug data in early June. The stock now trades near a multiyear high; the share price is more than 400 percent higher than a year ago. This $4 billion market cap company focuses on treatment of cancer and immune system diseases. While the operating margin and the return on equity are both healthy, investors should note the price-to-earnings ratio much higher than the industry average. Perhaps not surprisingly, the current share price has outrun the consensus price target of analysts. And short interest is more than 10 percent of the float. Over the past six months, the stock has easily outperformed the broader markets.

Vertex Pharmaceuticals

In early May, Vertex released the successful results of a cystic fibrosis study, sending the stock soaring. Though the share price has declined more than 4 percent in the past month, it is still about 59 percent higher than six months ago. This Massachusetts-based company has a market cap of more than $11.4 billion. For investors, positives include an attractive return on investment of more than 44 percent, and a consensus price target that is more than 17 percent higher than the current share price. Short interest on the stock is less than 4 percent of the float. Because of the surge in May, the stock has outperformed larger competitors Bristol-Myers Squibb and Merck (NYSE: MRK) over the past six months.

There has also been some takeover chatter about BioMarin Pharmaceutical (NASDAQ: BMRN), Rigel Pharmaceuticals (NASDAQ: RIGL) and Theravance (NASDAQ: THRX).

Posted-In: Amylin Pharmaceuticals Arena Pharmaceuticals BioMarin PharmaceuticalLong Ideas Short Ideas Rumors M&A Trading Ideas

 

Related Articles (AMLN + ARNA)

Around the Web, We're Loving...

Get Benzinga's Newsletters