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Biotech Stocks Burn Higher on M&A Fire

The biotech sector is burning with buyout fever as investors seek out the next takeout target.

Bristol-Myers Squibb's (BMY) $60-a-share takeover offer for ImClone Systems (IMCL) Thursday is just the latest in what appears to be a large ramp in mergers and acquisitions among biotech and big drug companies.

And naturally, deals beget more deals, or at least Wall Street chatter about the possibility of more deals, which invariably leads to sector rallies.

Summer is typically the slow season for biotech. Not this year, for sure. Roche seeking to acquire Genentech (DNA), and now the Bristol-Myers/ImClone deal has set the biotech sector on a raging boil.

The iShares Nasdaq Biotech ETF (IBB) is up 11% for the year after a 14% rally in July. The Amex Biotech Index is up 10% year to date, helped mightily by a 15% surge in July.

Who else might enter the M&A wheelhouse?

The trend seems to be partners getting hitched. Here's a list of biotech-biotech and biotech-Big Pharma partnerships, compiled on the fly Thursday by Deutsche Bank analyst Mark Schoenebaum:

  • Eli Lilly (LLY) and Amylin Pharmaceuticals (AMLN) (Byetta)
  • Genentech and OSI Pharmaceuticals (OSIP) (Tarceva)
  • Biogen Idec (BIIB) and Genentech (Rituxan)
  • Genzyme (GENZ) and Biomarin (BMRN) (Aldurazyme)
  • Vertex Pharmaceuticals (VRTX) and Johnson & Johnson (JNJ) (telaprevir)
  • Human Genome Sciences (HGSI) and Novartis (NVS) (albuferon and lymphostat)
  • Sanofi-Aventis (SNY) and Regeneron (REGN) (Veg-F Trap)
  • Bayer and Onyx Pharmaceuticals (ONXX) (Nexavar)
  • Novartis and Idenix Pharmaceuticals (IDIX) (various drugs)
  • Novartis and Momenta Pharmaceuticals (MNTA) (enoxaparin)
  • Takeda and Affymax (AFFY) (hematide)
  • Astellas and Cardiome (CRME) (vernakalant)
  • Wyeth (WYE) and Progenics (PGNX) (Relistor)
  • GlaxoSmithKline (GSK) and Adolor (ADLR) (Entereg)
  • GlaxoSmithKline and Theravance (THRX) (beyond Advair)
  • GlaxoSmithKline and Xenoport (XNPT)
  • Bristol-Myers and Medarex (MEDX)
  • Wyeth and Elan (ELN)

It's interesting to note that Amylin and Onyx are up 11.5% and 10.8%, respectively Thursday, a sure sign that investors are hoping that the pace of M&A activity in the biotech sector continues to ramp.


Come see Adam Feuerstein at the Money Show in San Francisco. Adam will be speaking to attendees on Friday, Aug. 8, at 2:15 p.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits"); on a lunch panel on Saturday, Aug. 9, at 12:35 p.m. ("Tech and Biotech: Picks and Pans for 2008 and Beyond"); and on Sunday, Aug. 10, at 8 a.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits").

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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