Adding a New Biotech to My Portfolio Amid a Notable Pick Up in M&A Activity
Here's why and how I have taken an initial position in this 'cheap story.'
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The last six weeks have seen a marked pick up in M&A activity in the biotech and biopharma space. By my count, five acquisitions between $2 billion and $7 billion have taken place since mid-September. I have been fortunate enough to have had two of these targets within my portfolio, including Avadel Pharmaceuticals (AVDL), which agreed to be acquired by Alkermes (ALKS) this past week.
The spike in deal volume has led to some long overdue investor enthusiasm on this high-beta part of the market, which has been a laggard for years like most non-AI related equities in this overbought environment.
At the end of the week, I added a new biopharma name to my portfolio via covered call orders. Rigel Pharmaceuticals (RIGL) is small-cap name focused on developing and commercializing therapies to treat hematologic disorders and cancer. Rigel has three FDA-approved treatments on the market. The stock currently trades at around $30 and has an approximate market capitalization of $550 million.
Rigel’s best-selling product is known by the brand name Tavalisse and is an oral spleen tyrosine kinase inhibitor. It was approved in 2018 in the U.S. for the treatment of patients with chronic immune thrombocytopenia (cITP) who have experienced an insufficient response to prior treatment. It has since been approved for use in in Canada, Europe, the U.K., Japan, and South Korea. Tavalisse is patent protected until 2032 and it did nearly $70 million in sales in the first half of this year, up nearly 45% from the same period in 2024.
Rigel also has a compound called Rezlidhia on the market. The company out licensed this therapy and brought it to market. This isocitrate dehydrogenase-1 (IDH1) inhibitor was approved to treat adults with relapsed/refractory (R/R) acute myeloid leukemia (AML) with a susceptible IDH1 mutation in 2022. This indication is small subset of the overall AML population. Rezlidhia did just over $13 million in revenues in the first half of 2025, which was an increase of 31% from H1 2024.
Rigel brought a third inhibitor, Gavreto, to market in mid-2024. Gavreto is a once-daily oral kinase inhibitor of wild-type RET (Rearranged during Transfection) and RET fusions. This therapy is approved to treat metastatic RET fusion-positive non-small cell lung cancer (NSCLC) in which patients both require systemic therapy and are radioactive iodine-refractory. Gavreto’s initial rollout has seen solid traction and the treatment delivered just under $21 million in revenues in the first two quarters of 2025.
In addition to these three approved inhibitors on the market, Rigel is advancing a couple of promising inhibitors in its pipeline. One wholly owned and the other licensed from Eli Lilly (LLY) ).
Rigel is already profitable and possesses a solid balance sheet. The company is expected earn over $4.50 a share in 2025. However, a large chunk of this will be due to a non-recurring collaboration payment. Normalized earnings will be closer to $2.35 to $2.40 a share. The analyst consensus has Rigel posting profits of just over $2.90 a share in 2026.
Management boosted its 2025 revenue guidance significantly following Q2 results. Leadership now expects between $210 million and $220 million in net product sales this year, up from previous guidance of between $185 million and $192 million. Revenues in the first half of 2025 matched all of 2023 results, it should be noted.
All in all, Rigel is a fairly cheap story — one I can enhance with a covered call trade. While the bid/ask spread on the options is a bit wider than I would like, my covered call orders filled promptly on Friday.
Option Strategy
This is how one can initiate a holding in RIGL with a covered call order. As a reminder, covered-call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.
Using the June $30 call strikes, fashion a covered call order with a net debit in the $23.50 to $24.50 a share range (net stock price - option premium).
This strategy provides downside protection of 20% with upside potential of 25% over the option duration even if the stock trades flat.
At the time of publication, Jensen was long AVDL and RIGL.
