Biotech stocks (XBI +5%, IBB +3%) have broken out to new highs after two big acquisitions were announced in the sector this morning.
Mergers and acquisitions are a big part of the biopharma sector dynamic where the larger companies are flush with cash and looking to enhance their growth prospects. An increase in M&A was expected this year after tax reform passed in the US late last year. Investors were counting on it and today it delivered.
Celgene (CELG +0.3%) is buying Juno (JUNO +27%) for $9 billion, a 28% premium (or a 90% premium before reports of a potential deal broke last week).
French biopharma Sanofi (SNY -3%) is buying Bioverativ (BIVV +62%) for $11.6 billion, 64% premium in the hematological space.
Both of these deals were large and at healthy premiums.
The Juno deal makes a lot of strategic sense for Celgene (CELG +0.3%); an oncology powerhouse looking to 1) preserve its leadership in hematological malignancies and 2) add to growth beyond 2020, when its patents for Revlimid expire. Celgene sees big potential in cellular immunotherapy and couldn't let Juno slip by after Gilead (GILD +0.3%) acquired CAR-T rival Kite last year.
A number of oncology stocks are trading higher in response:
- Bluebird (BLUE +12%) is a coveted asset now more than ever with a leading CAR-T in multiple myeloma (partnered with Celgene), plus leading gene therapies in beta thalassemia and sickle cell disease.
- Editas (EDIT +12%) is partnered with Juno (now Celgene) for gene editing in cellular immunotherapies.
- Agios (AGIO +12%) is another oncology company is that already partnered with Celgene.
- Celectis (CLLS +10%) is trying the off the shelf approach (not autologous) in CAR-T, which would scale much easier, but this field is still very early.
- Adaptimmune (ADAP +5%) is one of the few publicly CAR-T assets left, albeit a seemingly lower quality than Juno or Kite.
- PARP inhibitor assets Clovis (CLVS +7%) and Tesaro (TSRO +7%) have been out of favor for months after large biopharma passed on acquiring them a much higher valuation.