Tsachy Mishal's  Instablog

Tsachy Mishal
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Tsachy Mishal is the Portolio Manager at TAM Capital Management Inc.. He is the author of the investment blog Capital Observer. http://www.capitalobserver.com/
My company:
TAM Capital Management Inc.
My blog:
Capital Observer
  • A Genzyme Deal Would Be A Boon For Large Cap Biotech  0 comments
    Jan 31, 2011 6:00 PM | about stocks: GILD, AMGN, SNY, SNY, CELG, BIIB

    Genzyme signed a confidentiality agreement with Sanofi signaling that the two sides are close to a deal. While a higher price would likely boost sentiment in the large cap biotech sector, I believe that a deal would be beneficial to the sector regardless of the price.

    There are only five biotech stocks with a market cap greater than $10 billion and Genzyme is one of them. It makes up over 11% of the market cap of this group. The group consists of Amgen, Gilead, Celgene, Genzyme and Biogen. Amgen, Gilead and Biogen are are all buying back stock aggressively. The float of shares in the large cap biotech industry is shrinking quickly and  a Genzyme deal would speed up the process. I believe that an attractive valuation and a positive supply and demand profile for the shares will lead to higher prices for the entire sector.

    I have bought Gilead and Amgen to take advantage of this dynamic. After the recent decline shares of Celgene are also attractively valued but I have not purchased them yet as there is a lot of momentum money fleeing the name and they are not aggressively repurchasing shares.

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