Is it time to jump into biotech?
What a year 2019 has been so far! We began the year with a bang. Biopharma M&A was has been front and center following BMY’s proposed $70 Billion USD acquisition of CELG. This seems to have triggered others to spring to action, as Eli Lilly announced to buy Loxo Oncology for about $8 Billion USD in cash thus gaining access to a portfolio of targeted medicines to treat cancers. This offer was about 68% premium of Loxo’s Friday close at $235/share.
Despite slowing topline growth and signiﬁcant post-tax reform ﬁrepower for numerous large-cap biopharma companies which supports M&A potential, one must point to the stock reactions for recent acquirers, notably GSK (-8% post TSRO offer), BMY (-14% post CELG offer) and LLY (-2% post LOXO offer). While this may be true, we still remain optimistic for M&As to continue in 2019, we urge you to consider drug pricing uncertainty in addition to recent volatility into your models.
In light of this M&A theme following the BMY/CELG announcement, we recommend keeping an eye on following the capital allocation commentary from AMGN, BIIB and GILD. Below, we provide our guidance on our top watchlist for the month of January. Specific dates and catalysts are provided for the following stocks, SRPT, INSP, SLDB, EXEL, and IMMU.
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