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) 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.