Therefore, it wasn’t surprising that Onyx recently became a major acquisition target for several larger pharmaceutical companies. Onyx Pharmaceuticals, Inc. (NASDAQ:ONXX) put itself up for sale on June 30, citing “expressions of interest” from potential suitors, and stated that it had already rejected an $8.7 billion offer from Amgen, Inc. (NASDAQ:AMGN), which valued the company at $120 per share. As a result, Onyx shares surged over 50% on July 1 to close at $131.
Amgen, Inc. (NASDAQ:AMGN) could increase its bid in the near future, since it desperately needs to strengthen its drug development pipeline. Over the past three years, the FDA has raised safety concerns regarding Amgen’s anemia drugs, and the patents on four of its five best-selling drugs will expire starting in 2015. In addition, Onyx’s announcement has also reportedly attracted the attention of Pfizer Inc. (NYSE:PFE) and Novartis AG (ADR) (NYSE:NVS), which could start a bidding war to acquire Onyx’s cancer drugs portfolio. With $21 billion in cash, Amgen certainly has the resources to acquire Onyx, but it would be the company’s second largest acquisition ever, after its $16 billion acquisition of Immunex in 2002.
The Foolish Bottom Line
Biotechs such as Immunomedics, ImmunoGen, Inc. (NASDAQ:IMGN), Seattle Genetics and Onyx Pharmaceuticals are exciting to invest in, but investors should be aware that market movements in this sector are more driven by clinical trials, approvals, and buyouts than fundamentals. For ADCs, I believe that Seattle Genetics is the safest bet, thanks to its size and heavy industry partnerships, and it could take off over the next few years as more of its ADCs are approved. For cancer drugs, I think that Onyx’s attractive revenue stream (up 102% year-on-year last quarter) will attract more buyers, and that investors could still see a significant boost from its current price.
However, I encourage investors to do their due diligence with these stocks, since investing in biotechs with only a cursory understanding of their drug pipelines can be highly toxic for your portfolio.
Leo Sun has no position in any stocks mentioned. The Motley Fool recommends ImmunoGen and Seattle Genetics.
The article Should You Invest in These Cancer Treatment Biotechs? originally appeared on Fool.com and is written by Leo Sun.
Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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