Biotechnology sector-related exchange traded funds were in a bright spot on Friday after Bristol Myers Squibb Co. (NYSE: BMY) said it will acquire drug developers Turning Point Therapeutics (NasdaqGS: TPTX).
Among the best performing non-leveraged ETFs of Friday, the SPDR S&P Biotech ETF (NYSEArca: XBI) increased 3.1% and the Virtus LifeSci Biotech Clinical Trials ETF (BBC) gained 3.4%.
Meanwhile, Turning Point Therapeutics shares surged 116.5% on Friday. TPTX makes up 1.2% of XBI’s underlying portfolio and 0.8% of BBC.
Bristol Myers Squibb Co announced it will buy out Turning Point Therapeutics Inc for $4.1 billion in cash to help expand its line of cancer drugs, Reuters reported.
Specifically, Turning Point’s lead drug, repotrectinib, focuses on mutations in certain proteins in the body that lead to uninhibited cell growth, which increases the chance of abnormal growths with the potential to spread to other parts of the body, or otherwise known as cancer.
“The acquisition of Turning Point Therapeutics further broadens our leading oncology franchise by adding a best-in-class, late-stage precision oncology asset,” Giovanni Caforio, M.D., board chair and chief executive officer at Bristol Myers Squibb, said in a press release. “With this transaction, we are continuing our strong track record of strategic business development to further enhance our growth profile.”
Bristol Myers offered $76 per Turning Point share, or a 122.5% premium to its last closing price.
The large deal comes in a period of low merger and acquisitions in the biotechnology segment, clinical failures, and investors leaving this market segment, which have all contributed to the underperformance in biotechs.
Wall Street analysts argued that the deal could help improve the sector sentiment.
The deal “will surprise many investors who over the past year have begun to believe late-to-market targeted oncology drugs are likely to be commercial failures,” Stifel analyst Bradley Canino told Reuters.
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