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Why Clovis Oncology Inc. Shares Plunged

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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 Clovis Oncology (NASDAQ: CLVS  ) sank 12% today on a report that the cancer treatment developer had considered selling itself but couldn't find any takers.

So what: The stock had rallied in recent weeks on buzz over a potential sale, but the report from Bloomberg, citing a person with knowledge of the matter, naturally puts some of that excitement to rest. After all, when you couple Clovis' seemingly lofty valuation with the fact that it has no marketed products, the company seems like a particularly risky buy.

Now what: According to the report's source, Clovis is now considering alternative options, but that a sale is no longer likely.

"If you are the management of this company and your valuation seems a little bit exuberant, then it behooves you to explore a potential sale," Stifel Financial analyst Brian Klein told Bloomberg. "I'm not sure if it necessarily makes sense from an acquirer's perspective."

So unless you'd be perfectly willing to own Clovis as a long-term stand-alone investment, it's probably best to watch management make their moves from a distance.

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9/30/2016 11:29 AM
CLVS $35.64 Up +1.00 +2.89%
Clovis Oncology CAPS Rating: ***