January 10, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of hepatitis-C drug hopeful Idenix Pharmaceuticals (Nasdaq: IDIX ) are continuing their rally for a second day, currently up 21%, as speculation swirls that it will be the next takeover candidate.
So what: First, Gilead Sciences (Nasdaq: GILD ) ponied up $11 billion for Pharmasset (Nasdaq: VRUS ) , a company that has yet to get a molecule out of phase 2 clinical trials but has had promising trial results thus far. Then yesterday, Bristol Myers-Squibb (NYSE: BMY ) unveiled its intention to purchase Inhibitex (Nasdaq: INHX ) for $2.5 billion, a 163% premium over its previous closing price despite its blockbuster INX-189 only getting through stage 1 clinical trials. Idenix is simply riding Pharmasset's and Inhibitex's coattails higher.
Now what: I fully understand that the dreaded patent cliff is becoming a reality for many of the largest pharmaceutical companies out there, but that's no reason for Tulipmania to take over. Just when I thought Gilead was taking a big gamble by purchasing Pharmasset, Bristol-Myers did its best yesterday to try and trump that move. Warren Buffett has always warned investors to be fearful when others are greedy, and this is a perfect example. I wouldn't buy into Idenix's buyout rumors here, and I am absolutely maintaining my underperform CAPScall on the stock.
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