Why Onyx Shares Skyrocketed

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 biotechnology company Onyx Pharmaceuticals (UNKNOWN: ONXX.DL  ) soared a whopping 50% today after rejecting a takeover bid from drug giant Amgen (NASDAQ: AMGN  ) .

So what: Onyx said that Amgen's buyout offer of $120 per share significantly undervalues the company, triggering plenty of speculation on Wall Street that it could fetch a higher price from another buyer. A good chunk of medium-sized cancer drug developers have been acquired in recent months, and today's news suggests that the trend will likely continue. 

Now what: I'd be cautious about buying into the buyout buzz. While Onyx's cancer-focused pipeline is certainly attractive, today's speculative surge makes the downside just too large for average investors to touch. Unless you'd be perfectly willing to own Onyx as a long-term stand-alone investment, it's probably best to watch the process unfold from a distance.      

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