Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How to Ride the Surge in Biotech Mergers & Acquisitions

Companies / BioTech May 16, 2012 - 09:57 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleDon Miller writes: Innovations in biotechnology are evolving at the speed of light.

In fact, astonishing advancements in biotech have transformed the way we practice medicine. Leading-edge biotech products and breakthroughs are literally saving thousands of lives every day.

Needless to say, biotech stocks can be strong medicine for investors, too.

For instance, the Nasdaq Biotechnology Index rose 457% from the end of August 1998 to the end of February 2000. Going back even further to the early 1990s, biotech stocks have soared by 1,347%.

Think about it... for biotech investors every $10,000 invested turned into nearly $140,000.

The good news for investors is that after slumping during the recession, biotech stocks are making a comeback. In the first quarter of 2012 alone, the Nasdaq Biotech Index gained 18.2%

And conditions are setting up for even better gains in the future.

Here's why...

M&A Drives Biotech Stocks Higher
While many biotech companies are riding high on new drugs, the recent surge in biotech stocks largely reflects a slew of mergers and acquisitions (M&A).

More importantly, more deals are likely on the horizon.

In fact, 91% of industry executives believe pharma-biotech mergers will increase in the next 10 years, according to

You see, big pharmaceutical companies are losing their patents on lucrative blockbuster drugs and are about to lose billions of dollars in sales.

For instance, Pfizer Inc.'s (NYSE: PFE) cholesterol-lowering drug Lipitor earned the company a smooth $5 billion or so last year. And Bristol-Myers Squibb Co. (NYSE: BME) and Sanofi-Aventis SA (ADR NYSE: SNY) pocketed more than $6 billion in U.S. sales from the blood thinner Plavix.

However, both those patents have expired, opening the door for generic versions that could cost up to 80% less.

Fortunately for Big Pharma they're flush with cash, and the biotech sector is full of smaller biotech development companies with promising pipelines.

So instead of spending billions on years of research and testing to develop their own drugs, it only makes sense for big companies to swallow biotech companies with new products in advanced stages.

"The upside here is that large pharmaceuticals will continue to acquire these companies...They have tons of cash...which makes almost every publicly-traded biotech a target for someone," Josh Brown, a New York City-based investment advisor recently wrote.

The trend accelerated earlier this month when GlaxoSmithKline plc (NYSE: GSK) launched a hostile takeover for Human Genome Sciences (Nasdaq: HGSI), after HGSI rebuffed a $2.6 billion offer.

But large war chests also mean there's lots of competition to buy the best small companies with the most promising pipelines.

Reduce Guesswork with Biotech Stock ETFs
The current supply/demand squeeze sets up a perfect scenario for investors because it's likely to drive the price of acquisitions sky-high, according to Money Morning Executive Editor Bill Patalon, who spent years covering the biotech industry.

However, investing in biotech stocks requires not only an understanding of the company's finances, but also knowledge of the company's potential based on its products and technologies.

You can reduce some of the guesswork by using exchange-traded funds (ETFs), which give you exposure without betting the farm on a single company.

ETFs trade on major exchanges and expenses are generally lower than those of actively traded mutual funds.

Here are three biotech ETFs to consider:

•iShares Nasdaq Biotechnology Index ETF (Nasdaq: IBB): The "granddaddy" of biotech ETFs was established in 2001 and carries a market cap of nearly $1.8 billion, making it the largest in the category. IBB tracks the Nasdaq Biotechnology Index and focuses on big players like Amgen Inc.(Nasdaq: AMGN) andCelgene Corp. (Nasdaq CELG). Its expense ratio is 0.48%. One-year return is 28.4% and its year-to-date (YTD) return is nearly 17%.
•SPDR S&P Biotech ETF (NYSEArca: XBI): XBI holds 30 large and small biotech companies in equal weightings. That means smaller components have equal say in its overall performance. Accordingly, the fund got a nice boost after HGSI's stock jumped on the takeover bid. With a market cap of $518 million, its expense ratio is 0.35%. One-year return is over 26% and its YTD return is 18%.
•PowerShares Dynamic Biotechnology & Genome Portfolio ETF: (NYSEArca: PBE). This fund holds the usual large-caps like Amgen and Biogen Idec Inc. (Nasdaq: BIIB), but it also holds promising small companies including BioMarin Pharmaceutical Inc. (Nasdaq: BMRN), and Seattle Genetics Inc. (Nasdaq: SGEN), which have drugs in late-stage testing. Admittedly, it's higher risk, but these companies could be appetizing targets for Big Pharma. With a market cap of $140 million, its expense ratio is 0.63%. It has a one-year return of over 8% and a year-to-date return of 12%.

[Editor's Note: Handicapping buyout targets is a tall order. But we've already done the hard work for you.

Best of all: We've identified three biotech firms that are likely on a lot of radar screens.

But because they're quality companies with substantial growth potential, they are stocks worth holding even if no deals materialize.

To find out how to get your copy of the new report "The Biotech Buyout Binge: Why These Three Stocks Could Double Your Money in the Next Three Months" - just click here.]

Source :

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in