Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is This Drugmaker a Lavish Spender or a Bargain Hunter?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Bristol-Myers Squibb (NYSE: BMY  ) seems to see something in ZymoGenetics (Nasdaq: ZGEN  ) that most investors don't. Bristol-Myers is buying the beleaguered biotech for $9.75 per share -- a whopping 84% increase over yesterday's closing price.

I sure hope Bristol-Myers is right. At $735 million net of cash, ZymoGenetics doesn't come cheap with Bristol-Myers blowing through about 10% of the $7.5 billion it had in the bank at the end of the second quarter.

Technically, ZymoGenetics has a drug on the market, but it only sold $20.9 million worth of Recothrom in the first half of the year. The drug that helps stop bleeding during surgery has to compete against King Pharmaceuticals' (NYSE: KG  ) Thrombin-JMI and Johnson & Johnson's (NYSE: JNJ  ) Evithrom. Recothrom's market share is improving, but the drug isn't even covering costs to manufacture and sell the drug, let alone helping pay for research and development costs for ZymoGenetics' pipeline. Talk about needing to stop the bleeding.

But Bristol-Myers is basically buying ZymoGenetics for its pipeline. The companies are partners on pegylated-interferon lambda, a treatment for hepatitis C. The hope is that the drug produces fewer side effects and can unseat Roche's Pegasys and Merck's (NYSE: MRK  ) PegIntron, but it's not a guarantee. Human Genome Sciences (Nasdaq: HGSI  ) tried a similar strategy with Zalbin but was recently shot down by the Food and Drug Administration.

Who knows, maybe I'm overreacting here. Bristol-Myers seems to have made a good move acquiring partner Medarex to gain full control of their melanoma drug ipilimumab. And management was willing to walk away from ImClone Systems rather than get into a bidding war with Eli Lilly (NYSE: LLY  ) . Maybe Bristol-Myers is right about ZymoGenetics' price here, too, despite the fact that yesterday investors weren't willing to pay that much.

48% returns in a bear market? Alex Dumortier has the answer.

Johnson & Johnson is a Motley Fool Income Investor recommendation. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1294313, ~/Articles/ArticleHandler.aspx, 10/26/2016 5:38:11 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
BMY $49.29 Down -0.26 -0.52%
Bristol-Myers Squi… CAPS Rating: ****
HGSI.DL $0.00 Down +0.00 +0.00%
Human Genome Scien… CAPS Rating: **
JNJ $114.56 Up +0.60 +0.53%
Johnson and Johnso… CAPS Rating: ****
KG.DL2 $0.00 Down +0.00 +0.00%
King Pharmaceutica… CAPS Rating: **
LLY $76.76 Down -0.99 -1.27%
Eli Lilly and Co. CAPS Rating: ***
MRK $60.87 Down -1.08 -1.74%
Merck and Co. CAPS Rating: ****
ZGEN.DL $0.00 Down +0.00 +0.00%
ZymoGenetics, Inc. CAPS Rating: ***