In a move to bolster its pipeline of oncology drugs, pharmaceutical giant Pfizer Inc. (PFE) announced on Monday, June 17, that it would acquire cancer drug maker Array BioPharma Inc. (ARRY) in a deal worth up to $11.4 billion. The takeover is the New York-based company's largest acquisition since purchasing Medivation for $14 billion in 2016, another cancer deal it used to expand its oncology reach.
Cancer therapy companies rallied across the board yesterday as speculation of other similar possible deals gathered momentum. Pfizer's acquisition "signals more deals will happen," Jefferies Financial Group health care strategist Jared Holz told MarketWatch. "Anticipation around M&A should continue to drive momentum in the share price of some cancer therapy companies," he added.
Traders who anticipate further upside in the cancer therapy space should take a look at these three stocks that may be potential takeover targets for large drug makers. Let's discuss each company in more detail and explore possible trading opportunities.
Incyte Corporation (INCY)
Wilmington, Delaware-based Incyte Corporation (INCY) focuses on the discovery, development, and commercialization of various therapeutics in the United States. The biotechnology company's primary drug, Jakafi, treats rare types of blood cancer. Incyte recently initiated a phase three study of its fibroblast growth factor receptor inhibitor pemigatinib, a therapy for patients with metastatic or surgically unresectable cholangiocarcinoma – a bile duct cancer. Analysts have an average 12-month price target on Incyte stock at $88.06, which implies 7.6% upside from Monday's $81.84 closing price. As of June 18, 2019, Incyte shares have a market capitalization of $17.55 billion and are trading up 28.70% year to date (YTD), outperforming the biotechnology industry average and the S&P 500 by 23.04% and 13.43%, respectively.
The company's shares rallied sharply throughout January and February after setting a 52-week low at $57 in late December 2018. Over the past three months, a symmetrical triangle has formed, with the bulls and bears unable to gain control of price action. The stock continued its push higher from the pattern's lower trendline and 200-day simple moving average (SMA) in Monday's trading session, closing up 5.31%. Traders should look to buy a convincing close above the triangle's top trendline and anticipate a move to major resistance at $95. Manage risk by placing a stop-loss order below the 50-day SMA and amending it to breakeven if the price closes above the February high at $88.83.
Iovance Biotherapeutics, Inc. (IOVA)
Iovance Biotherapeutics, Inc. (IOVA) operates as a clinical-stage biotechnology company that develops cancer immunotherapy products to harness the power of a patient's immune system to remove cancer cells. The biotech company's relatively low market cap of $2.71 billion makes it a takeover target for large pharmaceutical companies that want to increase their exposure to the rapidly expanding immunotherapy market. Large drug companies may also be interested in Iovance's late-stage autologous cell therapy lifileucel, which is used to treat malignant melanoma. Investors have cheered the company's development this year, pushing Iovance stock up 115.82% YTD as of June 18, 2019.
Iovance shares gapped 34% above a cup and handle pattern on May 16 after the company reported encouraging results from its tumor-infiltrating lymphocyte immunotherapies. Since that time, the stock has continued to climb and set a 52-week high at $22 on Monday, June 18. Aggressive traders should consider buying yesterday's breakout and taking profits using a trailing stop. Those who are more conservative may decide to set a limit order near $18, where the price finds support from a horizontal trendline. In either case, cut losses if the stock fails to hold above the 2018 August swing high.
Blueprint Medicines Corporation (BPMC)
With a market cap of $4.61 billion, Blueprint Medicines Corporation (BPMC) is a precision therapy company focused on genomically defined cancers and cancer immunotherapy. The Cambridge, Massachusetts-based company said earlier this month that its inhibitor BLU-667 shrank tumors in 60% of a difficult-to-treat group of lung cancer patients and that it's preparing for a 2020 filing in patients with RET-altered non-small cell lung cancer who had already tried chemotherapy. Like Iovance, the biotech firm's relatively small market cap makes Blueprint a possible buyout choice for large drugmakers wanting to expand their reach into the cancer therapy space. The company's stock has soared 75.18% YTD as of June 18, 2019.
Blueprint's share price has rocketed higher to set a 52-week high at $100.76 since piercing below the 200-day SMA earlier this month. Despite closing toward its session low in Monday trade, the stock still finished the day registering a 4.12% gain on the Pfizer takeover news. Furthermore, the stock remains well above a crucial area of previous resistance at the $90 level. The relative strength index (RSI) sits below the overbought threshold, giving the price ample room to continue its upside momentum before consolidating. Consider buying yesterday's breakout and setting a take-profit order near the March 2018 high at $109. Set a stop order beneath the June 14 low at $88.83. The trade offers a decent risk/reward ratio of 1:2.6 ($5.61 stop loss / $14.56 target price), assuming an execution at yesterday's $94.44 closing price.