Biotechs Rising as Buyouts Sweep the Market

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Biotechnology stocks are ripping in 2019, fueled by some high-profile takeovers.

It was only the second trading session of the year that Bristol Myers Squibb (BMY) gobbled up Celgene (CELG) in a record $74 billion deal. Loxo Oncology (LOXO) accepted an $8 billion bid from Eli Lilly (LLY) a few days later.

Since then, investors have been looking for other potential buyout targets. They’ve especially sought oncology (cancer-treatment) companies. Here are some names that have emerged so far:

Incyte (INCY): Its leading product, Jakafi, targets bone cancer. Its pipeline includes several other compounds for related disorders. INCY’s 24 percent rally since the start of January makes it the S&P 500’s sixth-best performer so far this year.

Nektar Therapeutics (NKTR) is the index’s second-best performer in 2019 with a 35 percent gain. It’s already partnered with BMY and Pfizer (PFE) for development of its NKTR-214 compound for the treatment of various cancer types. NKTR can also be viewed as a value play after losing about two thirds of its value last year.

Incyte (INCY) chart, with 50-day moving average nearing a cross above the 200-day MA.

Mirati Therapeutics (MRTX) is also working with BMY on Phase 3 trials of Sitravatinib. The medicine will be combined with BMY’s Opdivo treatment to help patients’ immune systems fight cancer. If successful, the company will seek regulatory approval from the Food and Drug Administration.

Clovis Oncology (CLVS), Array BioPharma (ARRY), Blueprint Medicines (BPMC), Epizyme (EPMZ): Industry experts view these companies as peers of LOXO. They’re mostly in the development stage.

Exelixis (EXEL) has both products on the market and in its pipeline. Its Cabometyx kidney-tumor drug grew sales more than 60 percent last quarter. Excitement about its pipeline lifted EXEL more than 700 percent between April 2016 and early last year. The stock is starting to climb again after giving up half those gains in the second half of 2018. Its 50-day moving average also rose through its 200-day moving average yesterday — a so-called “golden cross.” Chart watchers often consider that a bullish reversal pattern.

In conclusion, biotechnology has returned to favor this year as investors hunt for value and potential takeover candidates. So far, these seem to be some of the stocks drawing attention.

Disclosure: This post is intended for education purposes only and shouldn’t be interpreted as a trade recommendation.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.