Shares of Clovis Oncology (CLVS) are on the rise once again after Credit Suisse upgraded the stock to Outperform, a Buy-equivalent rating, with its analyst Kennen MacKay highlighting the company's potential as takeover target. This comes on the heels of recent rumors that Eli Lilly (LLY) had expressed interest in acquiring Clovis, which Leerink analyst Seamus Fernandez sees as making "strategic sense."

POTENTIAL TAKEOUT TARGET: Credit Suisse's MacKay upgraded Clovis to Outperform this morning, given the potential for the company to be a takeout target. Moreover, the analyst told investors that a potential acquisition outweighs concerns surrounding patent life, limited experience in platinum resistant/refractory patients, and competition from other PARP inhibitors in development. Clovis could be worth $35-$41 per share in a buyout on operational synergies, and $52-$55 per share with leveraged tax benefits, MacKay estimated. He sees Eli Lilly, Merck (MRK), and Japan's Takeda (TKPYY) as possible suitors. Following the Food and Drug Administration's acceptance of Clovis' rucaparib for the treatment of BRCA-mutant ovarian cancer, the analyst pointed out that he continues to await data at the European Society for Medical Oncology congress to get a better sense of rucaparib's competitive profile.

ACQUISITION BY LILLY MAKES SENSE: In a note of his own, Leerink's Fernandez also speculated on takeover rumors, particularly Eli Lilly's alleged interest in acquiring Clovis. Fernandez pointed out that the addition of a PARP inhibitor, which is a class of drugs being developed for multiple indications, most importantly in the treatment of cancer, makes strategic sense, fitting in "extremely well" with Eli Lilly's oncology portfolio. Further, the analyst said he believes that the "impressive" emerging data from the PARP inhibitor class is likely to place both TESARO (TSRO) and Clovis high on the list of potential M&A targets, with the latter's rucaparib as a possible cheaper option that should still provide marketing opportunity as well as the potential for combinations with several of Eli Lilly's current pipeline assets.

M&A NEWS IN PHARMA SPACE: Last week, Gilead Sciences (GILD) announced the pricing of senior unsecured notes in an aggregate principal amount of $5B, sparking speculation of an imminent M&A deal and sending shares of TESARO and Clovis higher on takeover rumors. In an article also last week, TheStreet's Adam Feuerstein noted that both companies could be takeover targets for Gilead following Pfizer's (PFE) acquisition of rival Medivation (MDVN). Gilead chief scientific officer Norbert Bischofberger had confirmed to Feuerstein that the company did attempt to acquire Medivation but abandoned the bidding on price, adding "there are at least three, maybe four PARPs that are ahead of Medivation's." Yesterday, Allergan (AGN) announced two M&A deals, namely the acquisition of Akarna Therapeutics and Tobira Therapeutics (TBRA ). The deal with Akarna gives Allergan global rights to its lead product AKN-083, a preclinical compound in development for non-alcoholic steatohepatitis, or NASH, a type of non-alcoholic fatty liver disease. According to Allergan, the drug is a "potentially best-in-class" therapy and "highly complementary" to the Cenicriviroc and Evogliptin compounds in development at Tobira, which is also focused on therapies for NASH and other liver diseases.

PRICE ACTION: In morning trading, shares of Clovis have gained 3.5% to $36.05. Over the last month, Clovis shares have more than doubled in value.