The Amgen, Inc. (AMGN)-Onyx Pharmaceuticals, Inc. (ONXX) Deal Should Make All Biotech Investors Happy

Page 1 of 2

As I’m sure you’ve probably heard by now, Amgen, Inc. (NASDAQ:AMGN) agreed to purchase Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) for $125 per share.

Amgen, Inc. (NASDAQ:AMGN)

While that’s certainly not what Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) investors were hoping for — at one point, after Amgen, Inc. (NASDAQ:AMGN) made its initial $120 bid, shares of the biotech topped $136 — the deal looks healthy for the sector in general.

M&A still an option for exit
Without a doubt, M&A is still the easiest way to make money in the biotech sector. Unlike the typical binary event, an acquisition only has upside potential; unless it’s a take-under, there’s no downside related to the M&A event. Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) investors who were holding before Amgen, Inc. (NASDAQ:AMGN)’s initial bid was announced are sitting on a nice 44% increase.

Without a doubt, it’s good news for the industry that Amgen, Inc. (NASDAQ:AMGN) would go after Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) and still raise its bid when it appears no one else was interested in buying the biotech. Investors in other biotechs should see an increase in value simply because there’s a possibility that they’ll be bought. I wouldn’t buy for that reason alone, but it’s nice to have a valuation bump as long as it doesn’t get out of control.

Partner shmartner
Conventional wisdom says having a big pharma partner makes a biotech less likely to be a takeout target because potential buyers won’t want to work with the partner. The most obvious buyer is the current partner, and it’s hard to get a bidding war going with just one bidder.

But Amgen, Inc. (NASDAQ:AMGN) was still willing to purchase Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX), which markets Nexavar with Bayer. There’s more to Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) than Nexavar — its blood cancer drug Kyprolis was likely just as much a factor in the purchase — but the fact that Amgen, Inc. (NASDAQ:AMGN) wasn’t scared off by having to work with Bayer is a good sign for other commercial-stage biotechs with partners.

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), for instance, is partnered with Eisai for their obesity drug Belviq. While I doubt anyone would be interested in buying Arena right now given the lackluster launch, if the companies can overcome the challenges of selling obesity drugs, it’s not hard to see how someone would want to buy Arena Pharmaceuticals, Inc. (NASDAQ:ARNA). The potential obesity market is huge (pun intended).

It’ll be interesting to see how far this “partners don’t matter” thought might go. Fellow Fool, Keith Speights, suggested that Seattle Genetics, Inc. (NASDAQ:SGEN) could be next, but the company has partnerships with 12 different companies. I’m not sure a big pharma would want to deal with that many of its competitors.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

The 20 Biggest Contracts in MLB History

The 7 Worst Blown Calls in Sports History

7 Free Ways to Advertise Your Business Online

The 18 Best R&B Songs of the 90’s

The 10 Most Dangerous States to be a Cop

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!