Biotech Stocks Burn A Hole In Big Pharma's Pocket; 202020 Aug 2020 08:47
Biotech stocks caught fire in late 2019, following a $195 billion biopharma acquisition spree among pharmaceutical giants like Bristol-Myers Squibb and AbbVie during the first nine months of the year.
The scorching pace of acquisitions kicked up another notch in early December, as Merck (MRK) and Sanofi (SNY) snapped up promising biotech names.
The buying fling has been a windfall for investors. Biotech stocks have far outpaced the stock market during the fourth quarter, collectively sailing more than 27% higher from the start of October to Friday's session. During the same period, the Nasdaq rose 9%. The S&P 500 had a 6.4% gain.
The industry also rose fastest over the past four weeks among the 197 industry groups tracked by IBD. That lifted the Medical-Biomed/Biotech group — a massive collection of more than 550 stocks — to a No. 1 ranking among IBD's industry groups on Friday.
And at least portions of the vast landscape of biotech stocks are primed for more deals in 2020, Loncar Investments Chief Executive Brad Loncar told Investor's Business Daily. Loncar is an index provider for two exchange traded funds with a focus on biotech stocks. He predicts gene therapy and oncology companies will be key buyout targets in 2020 — potentially keeping upward pressure on those biotech stocks.
"A lot of indications could be disrupted by (gene therapy)," he said. "The science is really impressive right now. In general, we've got to follow the science and I would say oncology and gene therapy are where the most exciting advances are happening."
He added: "I would expect that to be where M&A continues."
Biotech Stocks Nab Deals As Pharma Spends
This year turned out to be a banner year for biopharma mergers. In the first three quarters of the year, pharmaceutical companies spent $195 billion on buyouts, Informa Pharma Intelligence analyst Daniel Chancellor said in a November report. Many of their targets included biotech stocks.
In terms of total value, that number trails only 2015, which included Pfizer's (PFE) attempt to buy Allergan (AGN).
The biggest 2019 headlines were Bristol-Myers' takeout of biotech stock Celgene for $74 billion and AbbVie's (ABBV) plan to acquire pharma outlet Allergan for $63 billion. In both cases, the companies will get massive top-line boosts. The AbbVie-Allergan merger is still pending.
For Bristol-Myers Squibb (BMY), the addition of Celgene gives it access to another blockbuster cancer drug, Revlimid. In 2018, Revlimid generated $9.67 billion in sales, accounting for 63% of Celgene revenue. Revlimid patents will soon expire, however.
For AbbVie, acquiring Allergan adds a new "cash cow" to the company's wheelhouse. Allergan makes a number of medical aesthetic products, like Botox. The new lineup could help AbbVie stave off some of the impact of biosimilar rivals for its biggest drug, Humira, in Europe. U.S. Humira rivals are due in 2023.
Other takeouts include Pfizer's acquisition of Array BioP
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