Deal flow appears to be picking up, particularly in the world of big pharma and biotech stocks. MorphoSys (NASDAQ:MOR) is the latest company to be reportedly in talks with Novartis (NYSE:NVS) in a deal that would see its cancer drug portfolio rolled under Novartis’ massive umbrella. Shares of MOR stock are up around 50% in early afternoon trading on the news as investors price in a big premium.
This announcement is notable, as MorphoSys has more than one bidder in its proposed takeover. Incyte (NASDAQ:INCY) has also reportedly made a bid for the company, though the outcome of this situation remains uncertain.
That said, with two bidders (including a major name like Novartis) interested in MorphoSys, the likelihood of a deal getting done has just shot higher. Let’s dive into today’s move in MOR stock — and what investors should consider when it comes to this prospective deal.
MOR Stock Surges on Takeover Anticipation
MorphoSys’ drug pipeline is certainly intriguing to many pharma players. The company develops drugs aimed at various cancers, including lymphomas and other rare cancer types like bone marrow cancer. Its leading drug, Monjuvi, is a lymphoma treatment that has been sold via a profit-sharing agreement with Incyte. Thus, the previously reported potential deal with Incyte has already spurred interest around MOR stock, considering the apparent synergies.
Growth for MorphoSys’ drug portfolio will align with future indication approvals from regulators. Thus, there’s an uncertain path to profitability, but big drug companies may be looking to accept this risk in exchange for the higher growth potential that MorphoSys’ drugs provide.
Importantly, it’s worth noting that MorphoSys has recently been cutting costs in a bid to improve its balance sheet. The company has also stumbled in key clinical trials, leading to greater uncertainty. So, perhaps it’s unsurprising to see Incyte trading slightly lower in today’s session. Novartis was also trading slightly lower at one point today.
Overall, analysts appear to believe that this deal could be a big positive for MorphoSys and the sector as a whole. Other drug companies with competing offerings could be in play, leading to a surge in a number of competitors as well.
On the date of publication, Chris MacDonald did not hold (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.
