Biotechnology sector-related exchange traded funds strengthened Thursday after Bristol-Myers Squibb (NYSE: BMY) agreed to acquire rival Celgene (NasdaqGS: CELG) in a $74 billion deal, reigniting hopes of further deals in the industry.
The iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB), which includes a 6.7% position in CELG, rose 1.2% Thursday.
Bristol will acquire Celgene through a combination of stocks and cash, which represented a 54% premium above CELG’s closing price on Wednesday, but Bristol agreed to pay more later if Celgene delivers on three new approved drugs, the Wall Street Journal reports.
“This is a deal that brings the pipeline of Bristol-Myers Squibb to a fundamentally different level,” Bristol-Myers’s Chief Executive and Chairman Giovanni Caforio said.
CELG shares surged 21.7% in mid-day trading Thursday after the announcement while BMY was 14.1% lower.
The acquisition would be the second-biggest pharmaceutical and biotechnology deal if Bristol’s potential later payout is included.
Bristol-Myers Squibb and Celgene are two leading sellers of cancer drugs, with a combined product line of nine offerings that is worth more than $1 billion each in annual sales. The companies also revealed that their combined lineup includes six expected near-term product launches worth over $15 billion in potential revenue.
“We will also benefit from an expanded early- and late-stage pipeline that includes six expected near-term product launches,” Caforio said in a statement.
According to a conference call with analysts, company executives described the assets as “complementary” and with the potential to create “the preeminent global bio-pharmaceutical company,” Phys reports.
Some in the industry believe that this year could be marked by more deals in the pharmaceutical and biotechnology sector after the recent market pullback made purchases more palatable.
“With small/midsized cap valuations having ‘normalized’ and large biopharma now better positioned to execute (mergers and acquisitions), we do expect to finally see meaningful pickup in acquisitions many predicted for years,” RBC analysts wrote in a note last month.
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