NEW YORK (AP) — Shares of life science companies rose Wednesday after Swiss drugmaker Roche made a hostile offer to buy Illumina Inc. for $5.7 billion.
Illumina makes systems that analyze an individual's DNA, and Roche made an unsolicited offer to buy the company for $44.50 per share. In afternoon trading Illumina shares rose about 46 percent to $55.15, suggesting that investors think Roche will have to raise its bid to get the deal done.
In a telephone interview, Cowen and Co. analyst Doug Schenkel said stocks of companies that make life-science equipment have become inexpensive because of weak results in the second half of 2011 and concerns about the economy and their future funding. The lower stock prices made the companies attractive for potential acquirers.
He added that the companies generally have a lot of cash on hand, a history of strong returns and little debt, and they face fewer risks than other parts of the health care sector.
"This is an industry that's a health care segment, but it's a segment that doesn't have the same long-term structural concerns that a lot of segments do," Schenkel said. While life science companies have reported less demand from university research departments, sales to industrial companies and biotech drug companies are stable and sales to hospitals are solid because they see diagnostic tools as a way to save money.
Companies that make equipment that helps with DNA analysis are particularly hot because personalized medicine that customizes treatments based on individual patients' genes is seen as the wave of the future.
Schenkel said large companies like Agilent Technologies Inc., Thermo Fisher Scientific Inc. and Danaher Corp. are most likely to make an acquisition, while buyout targets could include Pacific Biosciences of California Inc., Complete Genomics Inc., Fluidigm Corp. and Affymetrix Inc. He said Life Technologies Corp. "could be a buyer or seller."
Pacific Biosciences makes genetic analysis technology focused on helping researchers investigating biochemical processes. In afternoon trading its shares rose 64 cents, or 16 percent, to $4.59. Fluidigm makes equipment used to control small volumes of fluid for applications such as genetic analysis. Its stock gained $1.04, or 7.5 percent, to $14.87. Shares of Affymetrix, which makes genetic testing instruments, picked up 10 cents, or 2.1 percent, to $4.85.
Shares of Cepheid, which makes the GeneXpert DNA testing system, added $1.61, or 4.9 percent, to $34.39. Shares of life sciences and medical research tools company Life Technologies gained $1.78, or 3.8 percent, to $49.09.
