Among the large-cap stocks making big moves in today’s market is drug maker BioMarin Pharmaceuticals (NASDAQ:BMRN). Shares of BMRN stock surged more than 12% in early afternoon trading today on news that Elliott Investment Management has built a stake in the company and has been working behind the scenes with management for “months,” signaling strong interest from the activist investor in this name.
Elliott Investment Management is among the more active hedge funds, often taking positions in companies that are underperforming, seeking board seats and influence to turn things around. Indeed, given BioMarin’s underperformance relative to the biotech sector this year, such a position is clearly being viewed by the market as a positive right now.
Let’s dive into what to make of this move and the market’s reaction to these reports today.
BMRN Stock Surges on News of Elliott Stake
Any time a hedge fund invests more than $1 billion in a given company, it’s certainly one the market will hone in on. And given BioMarin’s market capitalization of roughly $16 billion (after today’s move), it’s clear that Elliott has some big-time skin in the game in terms of improving this company’s operations moving forward.
Initial reports noted that the exact specifics of what has been discussed between BioMarin and the hedge fund are unknown. However, it’s clear that frustration over the “slow progress in the launch of its drug Roctavian to treat hemophilia” is a factor that’s driven at least some of BioMarin’s underperformance this year. Expediting this process and improving upon the company’s execution plans can be one area in which Elliott may be able to provide support.
From a strategic and operational standpoint, some investors appear to be underwhelmed with BioMarin. The hope is that a fresh set of eyes on key problems facing the company may turn things around.
While I do think it’s important to take activist investor positions in companies with a grain of salt (one person can only do so much), I also think that every situation is different. In the case of BioMarin, this move appears to make a lot of sense, and the market appears to be cheering this move in the manner it should today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
