There seems to be some strong M&A activity going on in the biotech and drug sectors recently. On Monday, GlaxoSmithKline (GSK) finally won in its fight to take over Human Genome Sciences (HGSI) for twice what the stock was trading at late last year.
In addition, the drug sector looks ripe for some increased activity from hedge funds and private-equity firms that see value in the space. This was demonstrated by yesterday's announcement that the private-equity firm TPG Capital acquired Par Pharmaceuticals (PRX) for an almost 40% premium.
Investors looking for companies that have good growth prospects and recent insider buying should consider the following two biotech equities.
Anacor Pharmaceuticals (ANAC) focuses on discovering, developing and commercializing small-molecule therapeutics derived from the boron chemistry platform
Here are five reasons why ANAC is a solid speculative play at under $6 a share:
- An officer picked up new shares in both March and June.
- The three analysts who cover the stock have price targets ranging from $9 to $16 a share, all more than 50% above the current stock price.
- The company has a solid balance sheet with about $40 million in net cash (around 18% of market capitalization) on the books.
- The company currently has four proprietary clinical stage candidates. Results of phase III trials on at least two of them should be provided by the end of the year, and if results are positive, that could drive the stock substantially higher.
- Given the company's small market cap ($140 million after subtracting cash) and promising compounds, Anacor would make a logical acquisition for a larger pharma firm such as Glaxo, with which it has worked on a drug in partnership.
Sequenom (SQNM) provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for various types of research.
Here are four reasons why Sequenom is worth a flyer at under $4 a share
- Insiders have been active buyers of the stock since late last year. A director continued to add to his position in May and June.
- The company has more than $100 million in net cash on the balance sheet, which represents just under 20% of its current market capitalization.
- The 10 analysts who cover the stock have a median price target of $6.75 a share on Sequenom, and Maxim Group just initiated the stock as a Buy in June. Institutions added 5% of its shares, on the basis of float, in the second quarter.
- Revenue is set to climb at least 50% in fiscal 2012, and analysts have sales growing north of 75% in fiscal 2013.