The health care sector is often fertile ground for mergers and acquisitions activity and the biotechnology sub-industry is usually the epicenter of both rumors and confirmed deals.

Large pharmaceuticals companies looking to bolster pipelines and guard against lost revenue from expiring patents frequently target mid- and small-cap biotech firms. Through the third quarter of 2013, there were over 164 deals involving companies classified as pharmaceuticals makers, life sciences or biotech outfits, according to Modern Healthcare.

With the biotech sector off to another strong start in 2014 (four biotech exchange traded funds rank among the 10 best non-leveraged ETFs to start the year), the sector could be ripe for a wave of consolidation. [One ETF Really Rising on Intercept Pharma News]

Combine the sturdy balance sheets of large-cap pharma and biotech names, the latter group consisting of the likes of Amgen (NasdaqGM: AMGN) and Biogen (NasdaqGM: BIIB), with still low interest rates, and 2014 could be the ideal for a raft of biotech M&A. Earlier this week, UBS identified nine potential takeover targets in the biotech space, including Alexion Pharmaceuticals (NasdaqGM: ALXN) and BioMarin (NasdaqGM: BMRN), reports Lee Jackson for 24/7 Wall Street.

While there are five prominent biotech ETFs on the market today, only one has prominent allocations to both of those names: The First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT). Alexion and BioMarin combine for 10% of FBT’s weight, according to issuer data, but the ETF’s exposure to the UBS takeover list does not end there.

As 24/7 Wall Street noted, UBS also sees Incyte (NasdaqGM: INCY), Medivation (NasdaqGM: MDVN), Idenix Pharmaceuticals Inc. (NasdaqGM: IDIX), Insmed Inc. (NasdaqGM: INSM), InterMune Inc. (NasdaqGM: ITMN), Puma Biotechnology(NYSE: PBYI) and Vertex Pharmaceuticals (NasdaqGM: VRTX) as possible takeover candidates.

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