NEW YORK (TheStreet) -- An acquisition in the biotech space Monday added weight to arguments that the sector is not overvalued after the recent sell-off. And investors on StockTwits.com readied their list of potential takeout targets mid-day even as the broader markets fell.
Mallinckrodt (MNK - Get Report) announced before the bell that it will acquire Questcor Pharmaceuticals (QCOR) for $5.6 billion. Questcor shareholders will receive $30 per share in cash and $0.897 Mallinckrodt shares, according to the press release. The deal is a 27% premium over Questcor's Friday closing share price.
Questcor, which makes an FDA-approved multiple sclerosis treatment, rose more than 17% by 10:30 a.m. Mallinckrodt shares fell more than 3% as some investors doubted the company would quickly see a return on its investment.
Perhaps more importantly, the iShares Nasdaq Biotechnology ETF (IBB) rose 2.5% by mid-day as investors bet that the purchase would support valuations in the space and encourage more consolidation. Bullish sentiment on the biotechnology sector increased 3% to 53% after news of the acquisition, according to StockTwits' analytics.
Some cashtaggers said the Questcor buy, coupled with a correction that saw the biotech sector lose 13% in the past month, would spur larger health care companies to acquire smaller drug-makers with promising medications.
Vertex Pharmaceuticals (VRTX) was one of the most discussed names on investors' potential acquisition short lists. It has a $15.72 billion market cap and two FDA-approved drugs. One medication, Kalydeco, is intended to treat cystic fibrosis. The other, INCIVEK, is prescribed for hepatitis C sufferers. The stock rose more than 1% Monday morning. Biomarin Pharmaceuticals (BMRN) was another mentioned company. The stock traded at near flat by 11a.m. though some said that the $9 billion company was an attractive target. The company has five drugs on the market and another seven in some phase of clinical trials. The stock is down 18% in the past month.
Traded $BMRN many times & profited..this huge drop is a market gift...May drop more, but watching to buy back..great drug pipeline.-- Chris (@Piggybank) Apr. 5 at 12:16 PM
At the time of publication, the author held no positions in any of the stocks mentioned.
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