Drug ETFs Surge on M&A Activity (AGN, VRX, IHE, XPH, PPH, AZN)

Over the past couple of days there has been news of several multi-billion dollar deals in the pharmaceutical sector. The big news came on Monday night when it began to leak that Valeant Pharmaceuticals VRX was going to make a bid for Allergan AGN, the maker of Botox. The deal could be worth as much as $47 billion in cash and stock. The share price of both stocks soared on the news.


This weekend there was a rumor that Pfizer PFE could make a bid for AstraZeneca AZN that would make it one of the largest deals in the sector, upwards of $100 billion. And then there was Novartis NVS buying the oncology unit at GlaxoSmithKline GSK for over $15 billion.


The flurry of M&A activity has helped the sector rebound from a nasty sell-off that was led by the biotech stocks over the last month. The moves over the last few days show the strength of the sector and the cash that is available for even more mergers in the future.


Pharma ETFs


When there is M&A activity in a sector it typically creates excitement and it attracts new money. This trend will help all pharma-related ETFs. The iShares U.S. Pharmaceutical ETF IHE has exposure to PFE and AGN, with both stocks in the top six holdings. In the last 12 months the ETF is up 26.5 percent and it charges an expense ratio of 0.45 percent.


The SPDR S&P Pharmaceuticals ETF XPH also has AGN and PFE in its top holdings at number two and number nine, respectively. The ETF is up 42 percent in the last year and it charges an expense ratio of 0.35 percent.


The Market Vectors Pharmaceutical ETF PPH is different than the first two listed because it invests in companies outside of the U.S. Therefore, the ETF can hold more of the stocks mentioned in the merger activity. Similar to the first two ETFs, AGN and PFE are in the top six holdings, but it also owns NVS, AZN, GSK, and VRX. All six stocks mentioned above are found in the ETF’s portfolio. The expense ratio is 0.35 percent and over the last 12 months it was up 25.4 percent.


Expect the ETFs to be on the move this week and possibly retest the highs set earlier this year.

Posted In: Sector ETFsETFs

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.