Wall Street climbed more than 1% on last Monday, carrying the upward momentum to the closing bell. Stock market rebounded from a sharp decline last week, helped by the deal making in healthcare sector and surge in energy shares. On March 30, Dow Jones industrial average gained 263.65 points, or by 1.5%, to 17,976.31, its biggest daily percentage gain since Feb 3. The S&P 500 index added 25.22 points, or rose by 1.22% to 2,086.24. The Nasdaq composite rose 56.22 points, or 1.15%, to 4,947.44.
The stocks in European markets followed the trend in the U.S. markets and also rallied. Germany’s DAX was up 1.8% and France’s CAC 40 gained 1%. Chinese stocks also rose to the seven-year high because of monetary policy easing and more infrastructure spending. Let’s dig in to understand what deals actually helped the markets rally in the positive direction.
Deals that helped the market rally
Deals and M&A activities have helped boost equities especially for smaller companies. Stocks rose from the beginning of the day and UnitedHealth Group (UNH, Financial) was the biggest gainer among the DOW components. UnitedHealth announced the acquisition of pharmacy benefit management (PBM) company Catamaran (CTRX, Financial) for $12.78 billion in cash. Shares of UnitedHealth surged 2.5% to $121, while U.S. shares of Catamaran rose 23.8% to $59.83.
Teva Pharmaceutical (TEVA, Financial) announced that it would buy Auspex Pharmaceuticals Inc (ASPX, Financial) for $3.5 billion to improve its product portfolio for treatment of diseases that hit the central nervous system. Horizon Pharma Plc. (HZNP, Financial) also announced the acquisition of Hyperion Therapeutics Inc (HPTX, Financial) for about $1.1 billion in cash, in a move to expand its drug portfolio by adding two treatments for a rare metabolic condition. The market responded well to the deals and acquisitions. U.S. shares of Teva added 0.9% to $62.52 while Auspex rose 41.5% to $100.36. Horizon rose 18.2% to $25.78 on the Nasdaq while Hyperion rose 7.6% to $45.98. Fujifilm Holdings Corp (FUJIY, Financial) agreed to buy U.S. biotechnology firm Cellular Dynamics International Inc. (ICEL, Financial) for $307 million for strengthening its presence in the regenerative medicine field. This deal got a surprisingly good reaction as price of Cellular Dynamics’ shares more than doubled, due to bulk trading.
Deals in Healthcare and biotech sector were appreciated at the Wall Street. M&A activity was one of main reasons for the rebound from the past week’s market slide. Investors believe that the market is still constructive and are looking forward to the continued M&A activity and deals as support in the backdrop for the market.
The crux of such M&As
M&A is helping the market but it is believed that the real cause of the market surge was from Europe and Asia. The Shanghai Composite recorded its biggest gains in two months as China’s central bank Governor Zhou Xiaochuan announced that China can ease policies if inflation continues to decrease.
Also, Teva Pharmaceuticals is finally on an offensive mode with the new deal with Auspex. The acquisition would fit well with Teva's own neurology-based commercial and developmental infrastructure. The transaction has been approved by the boards of Teva and Auspex and the key shareholders of California-based Auspex have entered into agreements indicating support for the deal which Teva expects to close by mid-2015.
CDI and Fujifilm share a common strategic vision for achieving leadership in the field of regenerative medicine. Fujifilm has successfully transformed its business structure for growth by expanding from traditional photographic films to other priority business fields. Fujifilm has positioned healthcare as one of its key growth areas.
The OptumRx and Catamaran deal under the UnitedHealth Group, is the one to look forward to. The transaction is expected to close by the fourth quarter of 2015 and would possibly add about 30 cents a share to the net earnings of United Health in 2016.
The positivity felt in the market
Market stocks kicked into the positive territory with all the biotech deals in the backdrop. Some buyers were stepping in after the steep slide noticed in the market in the week prior to March 30 when biotechnology stocks were among the biggest losers because of their towering valuations. Nasdaq biotechnology index (NBI) gained 1.1% on last Monday. As per BATS Global Markets, on last Monday about 5.8 billion shares changed hands on U.S. exchanges, below the 6.7 billion daily average of the month. Advancing issues outnumbered declining ones on the NYSE by 2,271 to 806, for a 2.82-to-1 ratio; while on the Nasdaq, 1,856 issues rose and 881 fell, for a 2.11-to-1 ratio.
Final word
It has been witnessed that the stock market reacts positively to such M&A news in the past as well, and currently the market has gained further momentum after the recent M&As were disclosed by the related companies. Let’s stay tuned and keep an eye on the forward moves of the stock indexes that could lead to investors returning to the shares and even boost their confidence and risk appetite.
