Salix Bidding War Provides Modest Boost for Pharma ETFs
Shares of Salix Pharmaceuticals (SLXP), the pharmaceuticals and medical device maker, are up more than 6.5% Wednesday after Endo International (ENDP) made a competing takeover offer for the company.
Endo is offering $10.6 billion, or $165 per share for North Carolina-based Salix, easily topping the $10 billion, or $158 per share Canada’s Valeant Pharmaceuticals (VRX) offered for the company. Valeant made that offer in late February.
With Salix being a long rumored takeover target, the stock has a track record of moving several exchange traded funds on mergers and acquisitions rumors. [ETFs for a Salix Takeover]
Previously highlighted as one of the ETFs that could benefit from a bidding war for Salix, the PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP ) is higher by almost 1% today. Coming into today, the $1.86 billion PJP allocated nearly 3.2% of its weight to Salix, making the stock the ETF’s 14 th -largest holding.
PJP tracks the Dynamic Pharmaceutical Intellidex Index which evaluates companies for inclusion based on “price momentum, earnings momentum, quality, management action, and value,” according to PowerShares.
The equal-weight SPDR Pharmaceuticals ETF (XPH) is up 1.1% and is back to within striking distance of its all-time high touched late last month. Salix and Endo are both top 10 holdings in XPH, combining for 7.7% of the ETF’s weight.
XPH offers investors a compelling mix of familiar blue chip pharmaceuticals names along with smaller, more nimble firms. Companies in the latter category are the ones more likely to be working on breakthrough treatments or be subject to mergers and acquisitions that can push shares higher. [A Look at Dominant Healthcare ETFs]
The Market Vectors Pharmaceutical ETF (PPH) is up only modestly today, lethargy that is attributable to that ETF’s 5.3% weight to Valeant. That stock is trading lower in the wake of Endo’s bid for Salix as traders surmise Valeant will either be forced to raise its offer or throw in the towel on Salix.
Endo and Salix combine for 1.6% of PPH’s weight and are two of the ETF’s three smallest holdings.
SPDR Pharmaceuticals ETF
