Why Dyne Therapeutics Stock Crushed the Market on Monday
Key Points
A peer is being acquired for a very high premium.
The market is clearly thinking Dyne might be next on a potential buyer's shopping list.
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Dyne Therapeutics (NASDAQ: DYN) had a Monday neither it nor its investors will ever forget. This wasn't of its own making, however, as a premium-priced buyout of a peer was attracting serious interest in its own equity. This propelled the stock to a more than 41% gain on the day, mirroring the trajectory of that soon-to-be-acquired fellow biotech.
Affinity for Avidity
That peer is Avidity Biosciences, which has agreed to be purchased by pharmaceutical giant Novartis in a deal that values the company at $12 billion. Novartis is paying a premium of 42% for Avidity's stock, hence the bullishness in Dyne that pushed its share price nearly as high.
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Both Dyne and Avidity are clinical-stage companies busy developing a similar approach to the treatment of muscle disorders. Their therapies utilize antibodies to deliver the therapy to the affected area of the body.
This is a relatively novel and cutting-edge approach in the biotech space, hence the interest of a sprawling pharmaceutical player with capital to spend, such as Novartis.
Buyer beware
The market's thinking, clearly, is that if Avidity can command a premium, a business taking the same approach like Dyne can also be sold lucratively. I should caution here that this doesn't make any offer from a deep-pocketed strategic investor a sure thing for Dyne. So for now, investors are best advised to concentrate on the company's inherent potential rather than a possible buyout.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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