ETFs for the Next Biotech Takeover Targets

On the heels of last week’s news that AbbVie (NYSE: ABBV) will acquire cancer treatments maker Pharmacyclics (NasdaqGS: PCYC) for $21 billion, speculation is abound regarding the next potential takeover targets in the biotechnology industry.

The biotech industry and the relevant exchange traded funds are not lacking for acquisition targets. That is a known fact, but AbbVie’s Pharmacyclics buy reminds investors that acquirers are willing to pay arguably rich premiums for biotech firms, particularly those with oncology exposure.

SunTrust Robinson Humphrey analyst Salveen Richter has identified several biotech firms that could be the next to be acquired, reports Lee Jackson for 24/7 Wall Street. Richter’s includes a pair of names that are found in some well-known biotech ETFs.

One of those names is BioMarin Pharmaceutical (NasdaqGS: BMRN), which “is expected to post around $700 million in revenue this year and possibly around $810 million next year, following the approval of Vimizim, an enzyme replacement therapy for Morquio syndrome,” according to 24/7 Wall Street.

Another is Incyte (NasdaqGS: INCY), which has significant oncology exposure, making the company an alluring target for a larger, cash-rich company on the prowl. [M&A Puts Biotech ETFs in Focus]

Among the ETF’s with solid exposure to BioMarin and Incyte are several funds that also held shares of Pharmacyclics at the time AbbVie announced its offer for that company. That group of ETFs includes the Market Vectors Biotech ETF (NYSEArca: BBH).

BBH allocates a combined 9.5% of its weight to BioMarin and Incyte. The ETF makes for an ideal avenue for gaining exposure to biotech mergers and acquisitions because over a quarter of its 26 holdings have been rumored to be takeover. Additionally, BBH has significant oncology exposure. [The Right Time for Biotech ETFs]