The health care sector was one of the busiest in terms of mergers and acquisitions activity last year with the pharmaceuticals industry seeing the bulk of the activity. Conventional wisdom dictates that cash-rich blue chip pharmaceuticals firms facing patent cliffs will use some of that cash to acquire biotech firms and the blockbuster treatments produce by the those companies.
However, a biotech is not at the center of the latest pharma takeover news. Though the talks are now considered dormant, Dow component Pfizer (NYSE: PFE) approached British rival AstraZeneca (NYSE: AZN) about a possible marriage valued at $101 billion, the Sunday Times reported over the weekend.
Pfizer is sitting on $70 billion in offshore cash it does not want to repatriate back to the U.S. to avoid a massive tax tab and it is possible the company or another suitor could revisit a bid for Astra. If Astra does consider a sale to a foreign company, it would be the largest ever foreign takeover of a British firm, according to the Sunday Times.
If Astra remains in the spotlight as a possible takeover candidate, that could be good news for the SPDR S&P International Health Care Sector ETF (NYSEArca: IRY). Astra is IRY’s seventh-largest holding at a weight of about 4.9%, but the British drug giant is not IRY’s only top-10 holding that has been rumored to be a takeover target.
Earlier this year, it was reported that Teva Pharmaceuticals (NasdaqGM: TEVA), the world’s largest maker of generic drugs, could be a takeover candidate as well. Teva is eighth-largest holding at a weight of 3.3%. [Teva Takeover Would Lift This ETF]
Although IRY is off 2% over the past month, the ETF has proved somewhat durable compared to other health care ETFs do its low exposure to biotech stocks, the sub-sector that has recently pressured the broader health care group. Biotech names account for just 4.7% of IRY’s weight. Last year, IRY was one of the top-performing health care ETFs. [An Overlooked Health Care ETF]