Global Blood Therapeutics (NasdaqGS: GBT) shares climbed Thursday, lifting biotechnology sector-related exchange traded funds, on speculation of takeover bids for the small drug developer.
On Thursday, the Virtus LifeSci Biotech Products ETF (BBP) rose 7.2%, the SPDR S&P Biotech ETF (XBI) increased 5.2%, and the ALPS Medical Breakthroughs ETF (SBIO) was up 5.1%.
Meanwhile, Global Blood Therapeutics shares surged 41.0% on Thursday. GBT makes up 2.3% of BBP’s underlying portfolio, 1.4% of XBI, and 1.2% of SBIO.
Global Blood Therapeutics, a drug developer with a focus on sickle cell diseases, climbed Thursday after Bloomberg reported that the company attracted bids for a takeover.
People familiar with the deal told Bloomberg that large pharmaceutical companies could be eying Global Blood Therapeutics as a potential acquisition target. Meanwhile, Global Blood Therapeutics is in talks with advisors to assess the potential deal, but nothing is set in stone yet, according to those insiders.
Many larger biotechnology and pharmaceutical companies have targeted smaller drug developers as patents on traditional blockbuster drugs have begun to expire. Consequently, many big drugmakers that are sitting on cash stores are beginning to target smaller developers, especially after the recent sell-off that has dealt a severe blow to the biotechnology equity segment and brought down valuations.
Global Blood Therapeutics currently offers a U.S. Food and Drug Administration approved drug, Oxbryta, to treat sickle cell disease, which produces irregularly shaped red blood cells that do not live as long as healthy blood cells and can block other blood vessels.
The ALPS Medical Breakthroughs ETF focuses on small- and mid-cap companies that have one or more drugs in either Phase II or Phase III trials. The component holdings have one or more drugs in either Phase II or Phase III U.S. Food and Drug Administration clinical trials. In a Phase II trial, the drug is administered to a group of 100-300 people to see if it is effective and to evaluate its safety. In a Phase III trial, the drug is given to a larger group, between 500-3,000 people, to confirm its effectiveness, monitor side effects, compare it to commonly used treatments, and collect information that will allow the drug or treatment to be used safely.
The Virtus LifeSci Biotech Products ETF tries to reflect the performance of the LifeSci Biotechnology Products Index, which tracks the performance of biotechnology companies with at least one drug therapy approved by the FDA.
Lastly, the SPDR S&P Biotech ETF, one of the largest biotechnology ETFs by assets, uses an equal-weight methodology, which means it tilts toward smaller companies, but not at the expense of exposure to some of the industry’s larger players.
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