(Bloomberg) -- Biotech stocks are on pace for their second-best month of the year with momentum revived by a return of M&A activity and early FDA approvals for highly anticipated drugs.
The Nasdaq Biotechnology Index rose for its eighth consecutive session on Friday. The benchmark has gained 12% in November, its largest monthly gain since January when the gauge posted its best-ever start to the year. The broader S&P 500 Index has climbed 3.6% since the start of November, while the S&P 500 Health Index has risen about 4.8%.
Industry experts are anticipating more mergers and acquisitions after Novartis AG's nearly $10 billion deal for Medicines Co, an $85 a share bid which represents a 45% premium to the company's closing price on Nov. 18.
“In terms of more deals, we expect more, and believe the Street will begin to position for further announcements into early 2020,” Jefferies health-care strategist Jared Holz wrote to clients on Wednesday.
He sees Sanofi, Gilead Sciences, Merck & Co. and Denmark-based Novo Nordisk as likely buyers. Premiums could come in far higher than expectations if the Novartis/Medicines tie-up and other deals are any indication, Holz said.
Small- to medium-sized biotech companies that could be snapped up by larger drugmakers have led gains in the Nasdaq Biotechnology Index. Among them, Clovis Oncology has surged 367% this month while Arrowhead Pharmaceuticals gained 83%. Earlier this week, a Cantor Fitzgerald analyst said Arrowhead's stock increase “reflects anticipation of M&A.”
Biotech Rallies as Novartis's $9.7 Billion Deal Revives Optimism
Bristol-Myers Squibb's record takeout of Celgene kicked off this year's string of acquisitions. News of that tie-up came ahead of the JPMorgan Health Care Conference in January, an annual industry confab in San Francisco that is frequently a catalyst for mergers and other deals. The event will take place again in early 2020.
To contact the reporter on this story: Tatiana Darie in New York at tdarie1@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Will Daley
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