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 NPS Pharmaceuticals (NASDAQ:NPSP), a biopharmaceutical company focused on developing therapies to treat rare diseases, skyrocketed as much as 26% after rumors surfaced that it could be the target of a buyout.
So what: According to a report from FT Alphaville, which cited familiar sources, Shire (NASDAQ:SHPG) has held internal talks and has been working with its advisors to possible arrange an all-cash offer for NPS Pharmaceuticals of around $40 per share. If Financial Times' blog is accurate, it would represent a valuation in excess of $4 billion for NPS and place a premium of roughly 50% on the company compared to yesterday's closing price. As of this writing, no comment has been issued by either Shire or NPS concerning the matter.
Now what: First off, let me point out that it's rarely ever a good idea to chase a stock higher because of a rumor. Often these rumors turn out to be nothing more than false leads and you could get stuck owning a company at a very disadvantageous price. That aside, I've long felt that NPS Pharmaceuticals would make a good fit for a larger pharmaceutical company. Gattex, NPS' short bowel syndrome therapy, has a free and clear path for all SBS patients and it comes with a monstrous orphan-protected price tag that should sustain profits for years to come. With the possibility of also bringing Naptara, its hypoparathyroidism drug, to market very soon, NPS could deliver an immediate EPS accretive boost to most big pharma players. In other words, I wouldn't place too much credence in FT Alphaville's rumor mill, but I would, if these rumors don't prove true, suggest you consider giving NPS a closer look on the likely pullback in its share price.
NPS may have soared today, but keeping up with this top stock over the long run might prove impossible
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.