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Shire-Dyax Merger Drove Biotech Stocks

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Healthcare sector outperformed

The bulls were back on Wall Street after some sluggishness in the market. The month of November began on a positive note with Dow Jones and the S&P 500 gaining 0.95% and 1.2%, respectively, led by the healthcare sector.

Biotech ETFs outperformed the broader market SPDR S&P 500 ETF (SPY), which gave a return of 1.2%. Among the biotech ETFs, the iShares Nasdaq Biotechnology ETF (IBB) rose by 3.9%, and the SPDR S&P Biotech ETF (XBI) rose by 6.6% on November 2, 2015. XBI closed at $70.98 and moved ahead of its 50-day moving average, but still traded below its 100-day moving average.

The above graph reflects the performance of XBI compared to SPY since October 26, 2015, on a day-to-day basis. During this period, XBI has outperformed SPY with a return of ~8.1% as compared to SPY’s return of 1.4%.

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Shire buys Dyax in a deal valued at $5.9 billion

Shire (SHPG) and Dyax (DYAX) announced that SHPG will acquire DYAX for $37.30 per Dyax share in a deal valued at ~$5.9 billion. DYAX shareholders may receive additional value through a non-tradable contingent value right (or CVR) that will pay $4.00 in cash per DYAX share upon approval of DX-2930 in HAE, representing a potential additional $646 million in aggregate contingent consideration. With this acquisition, SHPG will get DYAX’s DX-2930, a drug ready for phase three trials for the treatment of hereditary angioedema (or HAE). The drug will help SHPG in expanding its industry-leading HAE portfolio.

DYAX went up by 28.4% and closed at $35.35 on the merger news. On the contrary, SHPG went down by 1.1% to close at $224.68. The other stocks that gained are Ultragenyx Pharmaceuticals (RARE) and Intercept Pharmaceuticals (ICPT), which gave returns of 10.4% and 7.7%, respectively.

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