Biotech stocks rose Thursday as AbbVie announced plans to buy cancer drug developer ImmunoGen for $10.1 billion.Â
Shares of ImmunoGen closed nearly 83% higher Thursday, while AbbVie's stock closed almost 3% higher.
ImmunoGen develops cancer drugs called antibody-drug conjugates, or ADCs, which are designed to directly kill cancer cells and spare healthy ones. Shares of other biotech companies developing ADCs, which are among the hottest areas in the pharmaceutical industry, jumped on the news of the buyout.Â
That includes Sutro Biopharma's stock, which closed nearly 13% higher Thursday and shares of Mersana Therapeutics, which closed up more than 3%. Shares of ADC Therapeutics also closed 6% higher Thursday.
The SPDR S&P Biotech ETF, which focuses on small and midsize biotech companies, closed up 2% Thursday. The Nasdaq Biotechnology Index closed more than 1% higher.
Under the terms of the deal, AbbVie will pay $31.26 a share in cash for ImmunoGen, a roughly 95% premium to Wednesday's closing price. AbbVie said it expects to complete the acquisition, which aims to strengthen its oncology pipeline, in the middle of 2024.
Guggenheim analyst Michael Schmidt said the price of the deal reflects the "increasing interest we have seen from large biopharma companies wanting to increase their exposure" in ADCs, which he called an "attractive area."
For example, Pfizer agreed to acquire Seagen, a pioneer in ADCs, for $43 billion earlier this year. Merck and Daiichi Sankyo also recently agreed to jointly develop and commercialize three potential ADCs in a deal worth up to $22 billion.
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