Everyone’s buying biotech again

Yesterday brought the news that Roche would pay nearly $5 billion for Spark Therapeutics and that Ipsen would exchange more than $1 billion for Clementia Pharmaceuticals. The news sent biotech stocks higher, likely because “pharma might buy this” is a pretty core investment thesis for those who bet on startups, and a pair of buyouts looks like validation.

But perhaps more encouraging than pharma’s interest in buying is its willingness to spend big. Roche’s deal for Spark represents a roughly 120 percent premium to the company’s most recent closing price, and Ipsen is paying a nearly 75 percent markup for Clementia. And, as The Wall Street Journal pointed out, there’s a trend: In January, GlaxoSmithKline paid a 110 percent premium for Tesaro, and Eli Lilly acquired Loxo Oncology at 68 percent above its prior close.

The downside to all this looks to fall entirely on the buyers. As the omniscient Twitter user AndyBiotech observed, recent high-dollar transactions on the part of Gilead Sciences and Celgene were great for investors but, at least in the early going, debatable worth the money.