Biotech ETFs Surge Again On M&A News

by on July 24, 2009 | ETFs Mentioned:

Biotech ETFs, which saw tremendous gains earlier this week on news that Human Genome Science Inc.’s (HGSI) lupus drug had passed a key clinical trial hurdle, were big winners again on Thursday. The driver this time: news that antibody technology specialist Medarex had agreed to be acquired by Bristol-Myers Squibb Co. at close to a 90% premium. While funds with significant holdings in Medarex were the biggest winners, healthcare and biotech ETFs were up across the board, as the acquisition sparked hopes of a wave of M&A activity in the industry, with other pharmaceutical and biotech companies, such as Alexion, Allos, and AMAG, as potential takeover targets. Among the biggest ETF winners on Thursday:

  • SPDR S&P Biotech ETF (XBI): XBI holds more than 1.3 million shared of MDEX, meaning the company accounted for 4.5% of total holdings. XBI was recently up more than 8% for the day, and has climbed more than 10% over the last week.

 XBI

  • iSharesNasdaq Biotechnology Fund (IBB): IBB, which tracks an index comprised of companies that make up the biotechnology and pharmaceutical sub-index of the Nasdaq Composite, holds about 1.6 million shares of MEDX. IBB, which also has significant holdings in HGSI (668,000), was up nearly 5% on Thursday and has surged more than 10% over the last 7 days.

 IBB

  • PowerShares Global Biotechnology Portfolio (PBTQ): PBTQ, tracks the NASDAQ OMX Global Biotechnology Index, had about 1.1% of its holdings in MEDX (prior to Thursday’s jump in share price) and 2% in HGSI. PBTQ jumped almost 5% on Thursday and has added about 9% over the last week.

 PBTQ

While this week has been good to the health and biotech sector, there’s no guarantee that this strong performance will continue. Investors will likely be looking for some indication that the larger players in the space are beginning to gain a level of comfort in making acquisitions, snapping up smaller companies that they believe may have some promising products coming down the pipeline.

Disclosure: No positions at time of writing.