Please ensure Javascript is enabled for purposes of website accessibility

Why bluebird bio's Stock Jumped 12.9% on Wednesday

By George Budwell - Apr 7, 2016 at 8:55AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A rising tide lifts all boats.

What: Shares of the clinical-stage gene therapy company bluebird bio (BLUE -2.14%) jumped 12.9% Wednesday on heavier than normal volume.

Image source: Flickr via user South Florida Sun.

So what: The biotech's surge forward yesterday, however, wasn't due to a company-specific event. Instead, Bluebird's shares were apparently lifted by an industrywide rally that also drove the iShares Nasdaq Biotechnology ETF (IBB 0.72%) up by 5.88% on more than double the average volume for this broad-based fund. 

This sudden renewed interest in biotech stocks by investors seems to stem from the failed merger between Pfizer (PFE 0.78%) and Allergan (AGN) earlier this week. After the two large-cap drugmakers announced that they would abandon their planned merger, rumors immediately began to swirl about which companies Pfizer and/or Allergan would target as possible buyout candidates going forward. After all, Allergan is known for its penchant for acquiring promising biopharmas, and Pfizer undoubtedly needs to bring additional growth products into the fold in order to firmly put the patent cliff behind it.

Is Bluebird a viable buyout candidate? While anything is possible when it comes M&A activity in biotech and biopharma, my quick take is that Bluebird is still in the "prove it" mode of its life cycle, meaning that a buyout is unlikely right now. 

Now what: The bottom line is that the commercial potential of Bluebird's lead product candidate, LentiGlobin -- indicated as a treatment for the rare blood disorder beta thalassemia and severe sickle cell disease -- isn't exactly clear at this stage after a somewhat disappointing clinical update last November. So, until Bluebird's clinical pipeline matures further, I'd recommend investors stick to the sidelines with this risky clinical-stage company, and perhaps use a well-diversified ETF like the IBB to gain exposure to this particular group of stocks.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

bluebird bio, Inc. Stock Quote
bluebird bio, Inc.
BLUE
$3.20 (-2.14%) $0.07
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$52.88 (0.78%) $0.41
Allergan plc Stock Quote
Allergan plc
AGN
iShares Trust - iShares Nasdaq Biotechnology ETF Stock Quote
iShares Trust - iShares Nasdaq Biotechnology ETF
IBB
$116.44 (0.72%) $0.83

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.