Biotechnology stocks and sector-related ETFs were among the best performers Monday after Eli Lilly (NYSE: LLY) said it will acquire Loxo Oncology Inc. (NasdaqGS: LOXO) for $8 billion.
Among the best performers on Monday, the ALPS Medical Breakthroughs ETF (NYSEArca: SBIO) jumped 8.2%, testing its short-term resistance at the 50-day simple moving average. Other sector-related ETFs that track smaller biotech names also rallied, with the SPDR S&P Biotech ETF (NYSEArca: XBI) up 6.1% and Virtus LifeSci Biotech Clinical Trials ETF (BBC) up 4.3%. Meanwhile, the iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB), the largest biotech exchange traded fund by assets, gained 3.9%.
Eli Lilly said it is buying Loxo Oncology in a cash deal to expand the biopharmaceutical company’s oncology-treatment portfolio and added to a number of recent deals in the cancer-treatment space, the Wall Street Journal reports.
LOXO shares jumped 66.1% on the announcement. LOXO makes up 4.7% of SBIO’s holdings and 1.4% of XBI.
Related: Biotech ETFs Pop as Bristol-Myers Squibb Set to Acquire Celgene
Loxo is working to develop medicines to treat patients whom have cancer from single-gene abnormalities.
Deal-making in the biotech space has heated up as more companies look to acquire others to expand on product lines. For example, Bristol-Myers Squibb said it would buy Celgene in a $74 billion deal. Eli Lilly also completed another deal related to cancer treatments in June when it closed a $1.6 billion deal to buy out Armo Biosciences.
Eli Lilly’s chief financial officer, Josh Smiley, has said that the lower tax rate as a result of the new tax law helped the biopharm provider compete with companies outside the U.S. on deals for smaller firms.
Further fueling the biotech rally on Monday, shares of Insmed Incorporated (NasdaqGS: INSM) surged 42.7%. The stock was strengthening after the company said it expects its drug Arikayce to generate $9.8 million over the fourth quarter.
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