Big Pharma Is Making A Couple Of Big Acquisitions To Start The Week

Plus, we’re fast approaching the U.S. deadline to impose more tariffs on Chinese goods, House Judiciary Chairman Jerry Nadler said his committee will bring articles of impeachment against Trump this week, and Morgan Stanley says this stock is set to rocket higher.

Stocks were down slightly to start Monday with the Dow trading 40 points, or 0.1%, lower at the open. The S&P 500 also slipped 0.1%, while the Nasdaq opened just below the flatline.

Investor focus is on trade this morning as the deadline for the next round of tariffs on Chinese goods to go into effect is this coming Sunday. China Assistant Commerce Minister Ren Hongbin said today that China hopes to come to a phase one trade deal “as soon as possible,” following data that showed Chinese exports fell for a fourth straight month in November, putting pressure on officials to make a deal. At the end of last week, China had begun waiving tariffs on pork and soy imports from the U.S., and White House Economic Council director Larry Kudlow said the two countries are “close” to a deal, though also warned that U.S. negotiators are prepared to walk away if they don’t get the terms they’re looking for.

House Judiciary Committee Chairman Jerry Nadler said on Sunday that his committee will “presumably” deliver articles of impeachment against President Donald Trump this week. “We’ll bring articles of impeachment presumably before the committee at some point later in the week,” Nadler said, adding that congressional leaders have not yet finalized many of the key details of what might be included in any impeachment articles. Nadler said there is “overwhelming evidence” that Trump “put himself before the country.” “It’s certainly abuse of power, it might be obstruction of Congress,” Nadler said. “He put himself above the country, he sought to get foreign interference against the integrity of our election. This is a matter of urgency to deal with because we have to make sure the next election is conducted with integrity and without foreign interference.”

Paul Volcker, who served as Chairman of the Federal Reserve under Presidents Jimmy Carter and Ronald Reagan, has died at the age of 92. “Paul A. Volcker was a giant among American public servants,” said Alliance President Thomas W. Ross. “He was a man of great courage and integrity who committed most of his working life to the public good. He believed in the importance of an effective government to our democracy. He cared deeply about the future of America and the who serve in our government. Mr. Volcker leaves an amazing legacy of leadership, service, and impact.” Volcker is perhaps best known for helping to tame inflation in the early 1980s by raising Fed’s benchmark rate to 22%, and also was head of President Barack Obama’s Economic Recovery Advisory Board following the Great Recession where he created the Volcker rule, which sought to rein in commercial banks by keeping them from making the kinds of risky investments that helped spark the 2007 financial crisis.

Big pharma is opening up its wallet for a couple of big splurges to start the week. Merck announced this morning its $2.7 billion acquisition of ArQule, a clinical-stage biotech specializing in cancer drugs, and Sanofi announced that it was acquiring Synthorx—also a biotech focusing on cancer drugs—for $2.5 billion. Cantor Fitzgerald analyst Louise Chen wrote of the Merck deal, “We think this is a smart, strategic deal which will bolster MRK’s leading oncology franchise.” And SVB Leerink analyst Daina Graybosch said of the Sanofi deal, “With the acquisition, Sanofi oncology adds a novel, unencumbered, [immuno-oncology] asset with wide potential for synergy in combination with other IO assets.”

Morgan Stanley initiated coverage on Virgin Galactic shares today, giving the space tourism stock an Overweight rating and a price target of $22 – 169% higher than the current price. “A viable space tourism business is what you pay for today …but a chance to disrupt the multi-trillion-dollar airline [total addressable market] is what is really likely to drive the upside,” wrote Morgan Stanley analyst Adam Jonas in a note to clients. “The shares feature biotech-type risk/reward where today’s space tourism business serves as a funding strategy and innovation catalyst to incubate enabling tech for the hypersonic P2P (point-to-point) air travel opportunity.”

Stocks We’re Watching

Epizyme Inc (NASDAQ: EPZM): Shares of this late-stage biotech are up more than 10% in the last week following Epizyme’s release of positive data from its Phase 2 clinical trial evaluating its drug candidate tazemetostat in patients with follicular lymphoma. The data from the trial showed an objective response rate of 69% for patients with an EZH2 mutation and 35% for patients with wild-type EZH2, and was generally well tolerated by both types of patients. “Follicular lymphoma remains an incurable disease today, and it’s essential that patients be able to receive treatment for an extended period of time,” said Dr. Shefali Agarwal, chief medical officer at Epizyme. “We believe the clinically meaningful benefit of tazemetostat seen across both FL patient populations in this trial, along with its continued tolerability, are impressive findings. We are particularly pleased with the robust response rates, extended durability and consistency of data as assessed by investigators and independent reviewers. These data support tazemetostat’s potential to make a difference for FL patients, and we look forward to submitting our NDA for both patient populations later this month.”

Zumiez Inc (NASDAQ: ZUMZ): Zumiez shares popped 20% last week after the retailer reported a big earnings beat last Thursday. The retailer earned earnings per share of $0.75 on sales of $264 million, compared to expectations for earnings per share of $0.60 on sales of $260.9 million. CEO Rick Brooks said he was “very pleased with the third quarter performance” and said it “represented our fourth consecutive strong back-to-school season, our 13th quarter of positive comparable sales gains.”