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3 ETFs To Play Gilead's $21B Immunomedics Takeover

Biotechnology mergers and acquisitions appear to be back in a big way with news that Gilead Sciences (NASDAQ: GILD) is acquiring Immunom

· 09/14/2020 07:26

Biotechnology mergers and acquisitions appear to be back in a big way with news that Gilead Sciences (NASDAQ:GILD) is acquiring Immunomedics (NASDAQ:IMMU) for $21 billion.

That's a healthy premium to the target's market capitalization of $9.69 billion market capitalization as of Sept. 11. Shares of the target nearly doubled this year through Sept. 11 not because of its exposure to fighting the coronavirus, but rather because of its Trodelvy breast cancer treatment.

“The agreement will provide Gilead with Trodelvy (sacituzumab govitecan-hziy), a first-in-class Trop-2 directed antibody-drug conjugate (ADC) that was granted accelerated approval by the U.S. Food and Drug Administration (FDA) in April for the treatment of adult patients with metastatic triple-negative breast cancer (mTNBC) who have received at least two prior therapies for metastatic disease,” according to a statement issued Sunday by the companies.

Gilead is paying $88 a share for Immunomedics, certainly enough to put the following exchange-traded funds in the spotlight this week.

Defiance Nasdaq Junior Biotechnology ETF (IBBJ)

The Defiance Nasdaq Junior Biotechnology ETF (NASDAQ:IBBJ) is barely more than a month old, but it's poised to get its first taste of the high life because it's the ETF with the largest weight to Immunomedics at 3.43%.

IBBJ tracks the Nasdaq Junior Biotechnology Index, which is the small-cap offshoot of the Nasdaq Biotechnology Index, a benchmark in which is Gilead is one of the largest components.

Gilead's move on Immunomedics underscores an important point about IBBJ: it's chock full of companies that make for credible takeover targets.

Invesco DWA Healthcare Momentum ETF (PTH)

The Invesco DWA Healthcare Momentum ETF (NASDAQ:PTH), as its name implies, is a momentum-based strategy. As such, its current roster of 51 holdings is littered with companies with significant coronavirus vaccine exposure. However, Immunomedics resides just outside of PTH's top 10 holdings at a weight of almost 3%. That makes PTH the ETF with the second-largest weight to the stock behind IBBJ.

Principal Healthcare Innovators Index ETF (BTEC)

The Principal Healthcare Innovators Index ETF (NASDAQ:BTEC) was on the receiving end of a positive coronavirus boost for much of this year, but as is the case with so many health care ETFs in recent weeks, BTEC is peeling back from previous highs as investors grow concerned about electoral outcomes and vaccine timelines.

Fortunately, BTEC is a diverse health care ETF with leverage to themes that will continue growing after the virus is defeated. The fund's redemption story could start today by way of an almost 2% weight to Immunomedics.