Merger mania in the health care sector is on full display Monday after Swiss pharmaceuticals giant Roche announced Sunday it will acquire InterMune (NasdaqGS: ITMN) for $8.3 billion in cash.

The news, which has bolstered shares of several biotechnology exchange traded funds that hold shares of InterMune, highlights robust appetite by cash-rich big pharma companies to acquire their smaller, more nimble counterparts. Roche’s deal for InterMune also underscores why so many hedge funds are enthralled with pharma stocks. [InterMune Deal Ignites These Pharma ETFs]

Last week, the Wall Street Journal highlighted the list of 50 stocks that matter most to hedge funds with list being comprised of “positions that appear most frequently as top-10 holdings within hedge-fund portfolios as of the end of the second quarter,” according to the Journal.

The list is led by Actavis (NYSE: ACT), which was a top-10 holding for 67 hedge funds at the end of the second quarter, notes the Journal. Not far behind is Botox maker Allergan (NYSE: AGN). The California-based company was a top-10 holding at 41 hedge funds at the end of the second quarter.

Several dedicated pharma ETFs offer investors the opportunity to follow the smart money and grab exposure to hedge funds’ favorite pharma holdings. The $905.3 million SPDR Pharmaceuticals ETF (NYSEArca: XPH) is a fine example.

An ETF that has frequently been in the limelight due to health care mergers and acquisitions rumors and announcements, XPH features a combined 7% weight to Actavis and Allergan. XPH’s exposure to takeover candidates has helped drive the ETF to a 15.7% year-to-date gain.

Perrigo (NYSE: PRGO), Jazz Pharmaceuticals (NasdaqGS: JAZZ) and most recently, Salix Pharmaceuticals (NasdaqGS: SLXP), among others, have been mentioned as takeover targets. Those stocks combine for 12% of XPH’s weight with Salix, a potential target for Allergan, being the ETF’s largest holding at almost 4.8%. [Some ETFs Salivating Over a Salix Takeover]