Why Exact Sciences Rallied Over 50% This Week
Key Points
Exact agreed to be bought out by Abbott Labs for $105 per share.
The buyout is at a hefty premium to the share price at the start of the week, but still well below Exact's 2021 highs.
Shareholders should probably look to exit the stock soon, as shares have appreciated fairly close to the buyout price.
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Shares of cancer diagnostic specialist Exact Sciences (NASDAQ: EXAS) rallied 50.7% this week through Thursday at 3:30 PM EDT.
Exact was already riding a recovery after a stronger-than-expected earnings report earlier this month.This week, biotech giant Abbot Labs (NYSE: ABT) apparently took notice of the positive business trajectory, agreeing to buy out Exact for a significant premium.
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Abbot bids $21 billion for Exact
It was Bloomberg that first reported rumors of the buyout on Wednesday, citing that talks were nearing fruition, according to people familiar with the matter. At the time of the article, Exact only had a market cap of $13.2 billion.
Then, on Thursday morning, Abbott Laboratories and Exact Sciences announced their formal agreement for Abbott to acquire Exact for $21 billion, or $105 per share, representing a roughly 59% premium to where shares were trading on Wednesday morning, before rumors began circulating.
Abbott clearly sees Exact helping to boost its cancer diagnostics franchise to further penetrate the $45 billion market for colon and multicancer screening, the $5 billion treatment guidance technology market, and the $15 billion molecular residual disease detection market, all of which are served by Exact's products.
Exact shareholders are rejoicing somewhat at the significant premium to its recent share price, though the buyout price is still roughly 33% lower than the stock's all-time highs set back in 2021, which was just below $160 per share.
Image source: Getty Images.
Exact shareholders don't have much more upside
Assuming the deal is approved, the companies project it will close in the second quarter of 2026. Currently, Exact's share price is around $101 per share, leaving less than 4% upside in the stock over roughly a six-month time frame. That means if shareholders have other investment ideas they think can yield a better six-month return, they should consider exiting the stock either today or, if they want to defer capital gains tax to 2027, early next year.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories. The Motley Fool recommends Exact Sciences. The Motley Fool has a disclosure policy.
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