Investors are waking up.
The opportunity is far too great to ignore.
After a dismal outing in 2016, the biotech and pharmaceutical sector is back in a big way with 80 million baby boomers, millions of newly insured Americans, and new innovation leading the charge. It’s already forced the iShares NASDAQ Biotech ETF (IBB) and SPDR S&P Biotech ETF (XBI) to log their fourth consecutive week of gains.
Even analysts have admitted, “I think you want to own the smaller to mid-cap stocks in the group, which are actually showing some more relative strength here,” noted Ari Wald at Oppenheimer, as quoted by CNBC.
And, by the way, mergers and acquisitions show no signs of slowing down.
This year, Johnson & Johnson (JNJ) agreed to pay $30 billion for Europe’s biggest biotech company, Actelion. That follows the $6.9 billion worth of deals we saw in the first 10 days of the New Year, including Takeda’s buy of Ariad Pharmaceuticals in a $5.2 billion deal to strengthen its oncology portfolio.
Merrimack Pharmaceuticals also announced that it’s selling the rights to its cancer drug to Ipsen in a deal valued at $1.025 billion. And 14 of the biggest pharmaceutical companies are sitting with more than $220 billion in cash, ready to act. Much of that could be unlocked if Donald Trump permits the repatriation of cash and reduces corporate income taxes.
ACADIA Pharmaceuticals (ACAD) and Bristol Myers Squibb (BMY) could be prime takeover targets, too. Then there are companies like Achillion Pharmaceuticals (ACHN) that have seen significant interest in the last few months for good reason.
The company’s involvement with hepatitis C treatment has fueled a great deal of excitement in a highly competitive landscape. In fact, in the latter part of 2016, a Johnson & Johnson trial that used the ACHN hepatitis-C drug in combination with two others found a success rate of 100% over six weeks of treatment.
It’s part of the reason why Johnson & Johnson paid an upfront licensing fee to ACHN of $225 million and picked up 18.4 million shares at $12.25 a share. That’s a game changer that could make ACHN a prime takeover target.
In December 2013, The Cheap Investor first recommended ACHN at just $2.92 a share. It would rocket as high as $16.87 for a potential gain of 478%. While it has since pulled back, the stock is still worth looking into as another buyout target.
ACHN has been an incredible opportunity for our subscribers in the past. Now, with $409 million in cash, giving it enough capital to survive for years, coupled with interest from Johnson & Johnson, it’s very attractive. That’s why The Cheap Investor recommended ACHN at $4.09 in the February issue.