Why Onyx Shares Skyrocketed

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company Onyx Pharmaceuticals soared a whopping 50% today after rejecting a takeover bid from drug giant Amgen .

So what: Onyx said that Amgen's buyout offer of $120 per share significantly undervalues the company, triggering plenty of speculation on Wall Street that it could fetch a higher price from another buyer. A good chunk of medium-sized cancer drug developers have been acquired in recent months, and today's news suggests that the trend will likely continue. 

Now what: I'd be cautious about buying into the buyout buzz. While Onyx's cancer-focused pipeline is certainly attractive, today's speculative surge makes the downside just too large for average investors to touch. Unless you'd be perfectly willing to own Onyx as a long-term stand-alone investment, it's probably best to watch the process unfold from a distance.      

While you can certainly make quick gains in speculative biotech stocks, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

The article Why Onyx Shares Skyrocketed originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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