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3 Humongous Health-Care Stocks This Week

By Keith Speights - Apr 6, 2013 at 10:19AM

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These health care stocks made big gains to open the new month.

April showers might bring May flowers, but the first week of the new month has already seen several health-care stocks hit full bloom. Here are three of the most humongous stocks this week.

"Bidness" is good
Last week, Obagi Medical Products (NASDAQ: OMPI) made our list of humongous performers after Valeant Pharmaceuticals (BHC 0.10%) announced a $344 million bid for the company. This week saw a bidding frenzy, with Obagi shares jumping another 29%.

Merz Pharma Group entered the fray early in the week with an unsolicited offer of $22 per share, higher than Valeant's bid of $19.75 per share. It didn't take long for Valeant to kick things up a notch by raising its bid to $24 per share. Obagi shareholders got to sit back and watch as their stock took off amid the bidding war.

Some investors seem to be expecting more fun. Shares of Obagi are trading around $25.50, higher than Valeant's last offer. We should soon find out just how badly Merz wants the medical products company.  

"Bidness" is good (part 2)
Obagi isn't the only company for which "bidness" is good. Antibiotic maker Optimer Pharmaceuticals (NASDAQ: OPTR) shares soared 22% this week on talk of interest by multiple potential buyers.

Bloomberg reported that GlaxoSmithKline, Cubist Pharmaceuticals, AstraZeneca, and Japan's Astellas Pharma were all interested in picking up Optimer. If the reports are correct, that's quite a lineup of potential suitors. Bloomberg went on to add that Optimer hopes to get as much as $1 billion in an auction. That figure would price the company's shares around $18, significantly higher than they are now.

Robert W. Baird analyst Brian Skorney thinks that Optimer won't go for that much, though. In an article published by Reuters, Skorney suggested that Pfizer (PFE -0.15%) could be another possible buyer because of the big pharma's crop of antibiotic drugs that lose patent protection over the next few years. Pfizer has been rumored as a potential acquirer of Optimer in the past.

RBC -- easy as 1-2-3
A young Michael Jackson sang, "ABC, it's easy as 1-2-3." Shareholders of Astex Pharmaceuticals (NASDAQ: ASTX) would probably replace "ABC" with RBC after the stock jumped nearly 21%.

RBC Capital initiated coverage on Astex earlier this week with an "outperform" rating. Even better, the investment firm set a price target of $9 per share, around 70% higher than current levels after the nice gains this week. 

Astex also announced on Wednesday that the company would make 13 data presentations on its pipeline at the upcoming American Association for Cancer Research annual meeting. While the biotech is largely dependent for now on Dacogen, its drug targeting treatment of myelodysplastic syndrome and acute myeloid leukemia, several drugs in its pipeline should attract considerable interest. 

All three of these stocks have been quite good for investors lately. Over the longer run, I'd go with Astex as the best pick. The company does face the loss of orphan drug exclusivity in the U.S. for lead drug Dacogen this year, but I expect sales will remain strong and likely grow in Europe. This biotech stock should continue to blossom.

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Stocks Mentioned

Pfizer Inc. Stock Quote
Pfizer Inc.
$53.91 (-0.15%) $0.08
Bausch Health Companies Inc. Stock Quote
Bausch Health Companies Inc.
$9.87 (0.10%) $0.01
AstraZeneca PLC Stock Quote
AstraZeneca PLC
$67.40 (1.05%) $0.70
GlaxoSmithKline plc Stock Quote
GlaxoSmithKline plc
$44.06 (-0.81%) $0.36
Astellas Pharma Inc. Stock Quote
Astellas Pharma Inc.
$15.96 (-0.69%) $0.11
Cubist Pharmaceuticals LLC Stock Quote
Cubist Pharmaceuticals LLC

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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