Merger and acquisition developments pushed biotechnology stocks higher last week as several companies looked to build up drug pipelines through buyouts.
Foster City, Calif.-based Gilead kicked the week off by announcing a $2.5 billion buyout bid for Westminster, Colo.-based Myogen. That began a rally on the American Stock Exchange's biotechnology index that brought it to levels not seen since April.
On Tuesday, ImClone Systems Inc. revealed in a Securities and Exchange Commission filing that it had received a buyout offer for $36 per share from an unnamed suitor, but the company turned down the offer because it was opposed by financier Carl Icahn. Icahn owns about 14 percent of Imclone.
Imclone put itself on up for sale in January, but it took itself off the market in August, saying it did not receive a fair-price offer.
The M&A news rolled on Thursday when Canada-based AnorMed Inc. said it was informed by Cambridge, Mass.-based Genzyme Corp. that it was willing to up a bid for AnorMed to match a $515 million offer from its Cambridge neighbor and rival suitor Millennium Pharmaceuticals.
The activity in the sector "really reflects the scarcity in late-stage drug development," said Morningstar analyst Karen Andersen.
The sector could continue to hold strong, she said, specifically citing ImClone's disclosure. "If ImClone is able to draw interest, it bodes well for biotech names," she said.
The sector index climbed steadily during the week, reaching 709 points Thursday, a level last reached in April. The index rose as investors pushed the Dow Jones Industrial Average to record levels.
Often, buyout bids come from well-established pharmaceutical companies looking to buy out early stage development biotechnology companies in a bid to expand their development programs. But the Gilead deal surprised many. Gilead develops drugs to treat infectious diseases and Myogen develops drugs to treat cardiovascular disorders. But analysts called the buyout a good strategic move, despite the companies' different focuses.
Not as surprising were the indications that Genzyme might match Millennium's buyout bid for AnorMed. AnorMed is recommending Millennium's ofer to its shareholders. Genzyme, Millennium and AnorMed develop drugs for a wide range of ailments.
With third-quarter earnings announcements coming up, analysts are anticipating a continued trend in growth for the sector. Several expect mergers and acquisition activity to escalate through the remainder of the year.
In a September note, Citigroup analyst Dr. Yaron Werber said several large-cap companies could deliver on long-standing promises to use cash coffers to build up drug development pipelines. He said he expects the sector to rally through the rest of the year, citing attractive share prices and positive near term earnings outlooks for several companies.
Foster City, Calif.-based Gilead kicked the week off by announcing a $2.5 billion buyout bid for Westminster, Colo.-based Myogen. That began a rally on the American Stock Exchange's biotechnology index that brought it to levels not seen since April.
On Tuesday, ImClone Systems Inc. revealed in a Securities and Exchange Commission filing that it had received a buyout offer for $36 per share from an unnamed suitor, but the company turned down the offer because it was opposed by financier Carl Icahn. Icahn owns about 14 percent of Imclone.
Imclone put itself on up for sale in January, but it took itself off the market in August, saying it did not receive a fair-price offer.
The M&A news rolled on Thursday when Canada-based AnorMed Inc. said it was informed by Cambridge, Mass.-based Genzyme Corp. that it was willing to up a bid for AnorMed to match a $515 million offer from its Cambridge neighbor and rival suitor Millennium Pharmaceuticals.
The activity in the sector "really reflects the scarcity in late-stage drug development," said Morningstar analyst Karen Andersen.
The sector could continue to hold strong, she said, specifically citing ImClone's disclosure. "If ImClone is able to draw interest, it bodes well for biotech names," she said.
The sector index climbed steadily during the week, reaching 709 points Thursday, a level last reached in April. The index rose as investors pushed the Dow Jones Industrial Average to record levels.
Often, buyout bids come from well-established pharmaceutical companies looking to buy out early stage development biotechnology companies in a bid to expand their development programs. But the Gilead deal surprised many. Gilead develops drugs to treat infectious diseases and Myogen develops drugs to treat cardiovascular disorders. But analysts called the buyout a good strategic move, despite the companies' different focuses.
Not as surprising were the indications that Genzyme might match Millennium's buyout bid for AnorMed. AnorMed is recommending Millennium's ofer to its shareholders. Genzyme, Millennium and AnorMed develop drugs for a wide range of ailments.
With third-quarter earnings announcements coming up, analysts are anticipating a continued trend in growth for the sector. Several expect mergers and acquisition activity to escalate through the remainder of the year.
In a September note, Citigroup analyst Dr. Yaron Werber said several large-cap companies could deliver on long-standing promises to use cash coffers to build up drug development pipelines. He said he expects the sector to rally through the rest of the year, citing attractive share prices and positive near term earnings outlooks for several companies.
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