Shares of Pharmacyclics (NasdaqGS: PCYC), a maker of cancer treatments, surged nearly 17% Wednesday, extending a run that has seen the stock surge 80.1% this year, on news that the California-based company is mulling a sale.
Citing unidentified sources, Bloomberg reports that Dow component Johnson & Johnson (NYSE: JNJ)and Swiss pharma giant Novartis (NYSE: NVS) could be among the suitors for Pharmacyclics. Multiple suitors for the company could prove to be a boon for the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT), one of a scant number of exchange traded funds that have decent exposure toPharmacyclics.
Shares of FBT climbed 1.9% Wednesday on volume that was more than 25% above the three-month trailing average thanks in part to the ETF’s nearly 4.1% weight to Pharmacyclics. The stock was FBT’s third-largest holding as of Feb. 24, helping the ETF join 24 other healthcare funds among the 195 ETFs that hit all-time highs yesterday. [Time is Right for Biotech ETFs]
Where things get interesting for Pharmacyclics, and as a result, FBT, is how much of a premium a suitor will pay. Pharmacyclics closed Wednesday with a market value of $16.6 billion. Sources told Bloomberg the company could fetch $17 billion to $18 billion. The Financial Times reported Pharmacyclics could command $19 billion.
Splitting the difference, an $18.5 billion sale would be a healthy premium to where Pharmacyclics closed Wednesday and would likely be enough to provide a one-day jolt to FBT.
The $2.79 billion ETF, which is up 14% this year, is no stranger to benefiting from biotech mergers and acquisitions news. FBT surged in December when Dow component Merck said it would buy Cubist Pharmaceuticals (NasdaqGS: CBST) for $9.5 billion.
The ETF held an almost 6% weight to InterMune (NasdaqGS: ITMN), making the stock the ETF’s largest holding, in late August when Swiss pharmaceuticals giant Roche announced it would acquire InterMune for $8.3 billion in cash. [InterMune Deal Could Boost These Biotech ETFs]
Investors have added $402.3 million in new assets to FBT this year, the third-best total among the five oldest biotech ETFs.
First Trust NYSE Arca Biotechnology Index Fund
