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Looking for the best-performing sector in this year's big market rally? It may just be the biotech sector, which has erupted with astronomical gains in 2013. The Nasdaq Biotechnology Index has gained more than 46% year-to-date, and it added to its run this week with another 2.2% jump over the past five days.
For two of biotech's big winners this week, however, investors can thank not this sector itself -- but Big Pharma's Sanofi (NYSE: SNY ) . How? Let's catch up on what you need to know from the past week.
Acquisition rumors abound
It wasn't direct action by Sanofi itself that kicked shares of Regeneron (NASDAQ: REGN ) higher by 8.3% this week, but when Sanofi CEO Chris Viehbacher mentioned that his company could potentially increase its stake in the biotech firm, shares soared. Sanofi's stock has been under pressure this year, posting year-to-date gains of just 1.2% in a year when many Big Pharma giants have surged. With the company facing the patent cliff like many of its peers, it's looking for small acquisitions to beef up its cash flow.
Sanofi already holds a 16% stake in Regeneron, and the biotech company has thrived over the years in its partnership with the French pharmaceutical giant. Regeneron's already teamed up with Sanofi in the past over colorectal cancer treatment Zaltrip, which was U.S. regulators approved last August. Zaltrip's peak sales aren't all that impressive -- only in the range of the low hundreds of millions of dollars -- but that hasn't stopped Regeneron investors from winning big.
Over the past year since then, Regeneron's stock has surged by more than 90% -- and the company's already in the works again with Sanofi, this time on a cholesterol-fighting drug in late-stage clinical trials. If the partnership can keep Regeneron shares soaring, Sanofi's increasing its stake in this biotech might be just what the doctor ordered for investors.
Sanofi news didn't just help out Regeneron this week, however. Shares of ViroPharma (UNKNOWN: VPHM.DL ) blew up this week, gaining 27.5% over the past five days thanks in part because of a report from Bloomberg that claimed Sanofi, along with Shire, could be interested in acquiring the biotech. That was just fine for ViroPharma investors, who have enjoyed the stock's run-up of more than 67% this year.
ViroPharma already boasts Hereditary Angioedema, or HAE, therapy Cinryze in its portfolio, a drug that the company expects could hit peak sales of $700 million or more. That's a strong outlook for a company with a market cap of only $2.5 billion right now, and ViroPharma also won orphan drug status in Europe for its developmental cytomegaloviral therapy maribavir in June. Analysts have given strong projections for maribavir should it be approved, with some expecting it to eclipse blockbuster status eventually with peak sales over $1 billion.
Obviously, a Sanofi or Shire buyout would do wonders for ViroPharma investors -- but even if a buyout doesn't come, this stock's on pace for a strong showing in the long term.
Theravance (UNKNOWN: THRX.DL ) investors can't thank Sanofi for the stock's 8.5% gain over the past week, but the company still received a big boost when an FDA advisory panel voted in favor of its COPD drug Anoro Ellipta, developed alongside GlaxoSmithKline (NYSE: GSK ) .
Peak sales estimates are strong for Glaxo and Theravance's drug, which some analysts project could pull in $1.4 billion annually in the near future if approved. It's not quite a home run for Glaxo, which is looking for ways to complement blockbuster COPD and asthma treatment Advair, which, along with Seretide, made more than $8 billion last year. Still, an approval would help Glaxo in its attempts to beat the patent cliff, considering that Advair may face generic competition soon -- and it'd help Theravance continue its recent run, considering shares of the biotech are up 83% year to date.
Surging biotechs like Theravance have been an investor's dream in 2013 and are emblematic of just how well this sector can perform for investors when the stars align. However, for smart long-term investors interested in maximizing their portfolio's potential potential, the best investment strategy is to pick great companies and stick with them for years. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.