Why Global Blood Therapeutics Rocketed Higher Today

What happened

Global Blood Therapeutics (NASDAQ: GBT) is up 20% at 3:42 p.m. EST after Reuters reported that Novo Nordisk (NYSE: NVO) has approached the biotech about a potential acquisition.

So what

Reuters cites unidentified sources, and both companies declined to comment. Nevertheless, the rumor is probably true. Companies often have their bankers talk to the media to try and push things along.

If the two sides are far apart in price -- or Global Blood Therapeutics isn't willing to negotiate at all -- Novo Nordisk might want investors to know that it's interested in putting pressure on Global Blood Therapeutics. Alternatively, Global Blood could have released the information hoping to spur a higher bid from another company.With the price of insulin decreasing, Novo Nordisk's growth has stalled, and management has said it's interested in licensing products, or making bolt-on acquisitions, giving some validity to the Reuters article.

Global Blood's lead drug candidate, GBT440, which treats sickle cell disease, would fit nicely with Novo Nordisk's hemophilia drugs. The biotech is also testing GBT440 as a treatment forchronic hypoxemic pulmonary disorders, including idiopathic pulmonary fibrosis and acute respiratory distress syndrome. That might be a little outside of Novo Nordisk's wheelhouse, but the company could always partner out that indication if it didn't want to build out a sales force to target pulmonologists.

Image source: Getty Images.

Now what

While a deal between Global Blood and Novo Nordisk makes sense, there are no guarantees that it'll get done. Investors who buy at this inflated price should buy based on Global Blood's value as a stand-alone company, and treat any additional premium as a bonus if the biotech is purchased.

10 stocks we like better than Global Blood TherapeuticsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Global Blood Therapeutics wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.