Is Big Pharma Hinting At A SMID-Cap Biotech Rally?

UBS analyst Andrew Peters believes investors may be missing a strong bullish sign in the biotech sector this earnings season. According to Peters, the pullback in biotech stocks in recent months has made many smaller names compelling buyout targets, and big pharma earnings commentary seems to suggest that some major deals could be coming soon.

“This sentiment was put most bluntly by Gilead, suggesting that ‘there’s no question’ that the recent pullback in smid valuation has made M&A more attractive,” Peters noted in a new report. He added that the biggest risk to many potential deals could be the target companies' unwillingness to accept terms at such depressed valuations.

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Although the report didn't mention specific buyout targets by name, in included a list of big pharma companies that recently discussed the potential for M&A deals in the near future, including Gilead Sciences, Inc. (NASDAQ: GILD), Pfizer Inc. (NYSE: PFE), AbbVie Inc (NYSE: ABBV) and Bristol-Myers Squibb Co (NYSE: BMY).

Disclosure: The author holds no position in the stocks mentioned.

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