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Biotech Sector Could Jump 25% on Roche-Genentech Deal

Jul 25th, 2008 | By Rob Fannon | Category: Featured, Financial News

Swiss drug company Roche (OTC:RHHBY) may not get its hands on San Francisco-based biotech outfit Genenetech (NYSE:DNA) as quickly as it had hoped.

Genetech has formed a special committee of independent directors to evaluate the $89-a-share acquisition offer from Roche, which already owns 56 percent of the US biotech firm.

If the deal does go through it may be bad news for Roche and Genentech shareholders, according to Phase 1 Investor editor Rob Fannon in The Growth Stock Wire. But it would be good news for the biotech industry as a whole…

While I believe the bid is a bad move for Roche – and not a great proposal for Genentech shareholders – this mega-deal is actually good for the entire biotech industry… and its investors.

With Genentech gone, the top of the biotech food chain is empty. Many investors will be searching for new spots to park their biotech cash. And sector valuations are on the rise. Both major biotech indexes – the Nasdaq Biotech Index and AMEX Biotech Index – are up more than 7% in just a few weeks.

Small-cap biotechs are cheap right now. So I’d be willing to bet the sector could jump 25% or more in the coming months. And big-cap names like Biogen (NASDAQ:BIIB), Genzyme (NASDAQ:GENZ), and Elan (NYSE:ELN) have jumped to the top of Big Pharma’s short list of buyout candidates.

If you’re thinking of dabbling in the biotech sector, Roche’s bid for Genentech just may be the buy signal you’re waiting for.

Source: The Buy Signal You’ve Waited For


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Biotechnology sector has a rare explosive day (Biotechnology Stock, 7/8/08)
Switzerland’s Roche Makes $43.7 Billion Offer for U.S. Biotech Pioneer Genentech (Money Morning, 7/21/08)
Read more on Biotechnology, Roche Pharmaceuticals, Genentech at Wikinvest
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By Rob Fannon

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About the Author

Rob Fannon is the editor of Phase 1 Investor, a monthly conference-call service and investment advisory that covers the biotech industry and other small companies on the cutting edges of their industries. He later helped open a new biotechnology company in India and holds a master's degree in public health and an MBA from Johns Hopkins University. In February 2007, Rob launched The Medical Investor.

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The Growth Stock Wire is a free daily e-letter that provides readers with a pre-market briefing on the most profitable opportunities in the global stock, currency, and commodity markets. It is a quick read on the best trading opportunities in the market, along with price and news updates on all the major stock markets of the world. You'll also be updated on the latest in gold, oil, copper, the dollar, and individual stock market sectors.

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