Rick,
First, some kudos to you for calling a AGPH takeover at around this price back in the dark days in the late summer with the stock in the 20's. We'll forgive you for getting the particular gobbler wrong <G>.
My sense is that the immediate beneficiaries are the stocks most like AGPH - profitable 2nd tiers not already beholden or tightly partnered. That would include CNTO, PGNS and BCHE, and maybe GLIA and QLTIF. GILD and VRTX aren't profitable, but are in the same ballpark. The smaller companies with products like LIPO, NXTR and CELG might also benefit.
Now how about your third tiers? The trouble with these is you get bean counter resistance at the big pharmas. Even though they're cheap, they come with losses and no products. However, if they are already in bed together, an acquisition is always possible. Thus a PFE/NRGN or a LLY/SNAP deal wouldn't come as a big shock. Maybe even a MRK/SIBI deal is possible.
However, I've always felt a prerequisite for third-tier recovery is a healthy second tier. While stocks with products (like AGPH) were under severe attack, I couldn't see the third tier recovering. If the picture isn't so rosy even after you get a succesful product, why bother to invest in companies that don't have one? Now that the first and second tier is generally quite healthy (and some might say even fully-priced), people will naturally start looking further down the food chain.
Consider a graph of valuation against development stage. The right side of the graph (the first and second tiers) has been raised up. This means that either third tier valuations are going to be dragged up too, or the graph is going to be incredibly steep as companies transition into profitability. Right now, that's where I'm focused - companies with newly approved products and products likely to be approved over the next 2 years. I also own a sprinkling of the pure third tiers, just in case I get lucky.
Peter |
