Forest Labs buyout may boost other drug stocks

Actavis, a drug maker whose logo is seen here, plans to buy Forest Laboratories(Photo: AP)

Story Highlights

• Forest Lab shares soar on $25 billion buyout
• Investors wonder if other smaller drug companeis are in play
• Big drugmakers shares unchanged, but some smaller stocks see action

Forest Laboratories' investors are scoring big on news of the $25 billion buyout by Actavis, and some wonder if the interest will spread to other drugmakers' shares.

Shares of Forest Labs, a maker of treatments for conditions including irritable bowel syndrome, are definitely the biggest winners from the news, rocketing $20.88, or 29%, to $92.27 in midday trading Tuesday. And in an interesting twist, shares of the buyer, Actavis, is also higher, $13.36, or 6.7%, to $205.24. Typically, shares of the acquiring company initially fall as investors worry that it paid too much for the deal.

Investors wonder if this deal, though, puts the pharmaceutical industry in play and sets it up for further stock gains. Among the biggest reactions are among the smaller drug makers who compete with Forest, which presumably could be ripe for corporate deal making. Shares of Insmed, a biotech company developing treatments for lung diseases, jumped $1.98, or 11.9%, to $18.59.

Actavis CEO Paul Bisario will helm the newly enlarged company.(Photo: Maryanne Russell, AP)

Mallinckrodt, a developer of treatments for chronic pain, added $4.41, or 6.6%, to $71.62. And Mylan, which specializes in a number of injectable drugs, gained $2.79, or 6.1%, to $48.89.

Outside these smaller players, though, stock reactions were small with the largest drug and biotech companies. The U.S. drugmaking giants Johnson & Johnson, Pfizer and Merck each saw there shares move less than 1%. Foreign drugmaking giants Roche and GlaxoSmithKline saw their shares added 1.2% and 1.6% respectively.