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Biotech stocks rally as investors bet on the next big tie-up

Whether consolidation begets consolidation in the drug industry is often debated. What's not debatable, though, is that consolidation begets speculation about more consolidation.

That's driving up shares of several biotech companies Monday, after drug giant Pfizer announced its $14 billion deal for cancer drug developer Medivation. The deal price, of $81.50 per Medivation share in cash, is a 21 percent premium to where Medivation shares closed Friday, and is significantly higher than the $52.50 a share put on the table earlier this year by French competitor Sanofi.

"The process, like most capital markets, was efficient and competitive," Pfizer Chief Executive Officer Ian Read told analysts on a conference call Monday, in response to a question about other bidders for Medivation. In addition to Sanofi, Gilead, Celgene and Merck were all reported to be interested.

As the winner, Pfizer gets Medivation's approved prostate cancer drug, Xtandi, which draws more than $2 billion in annual sales — though proceeds are split with partner Astellas. Medivation also has two experimental cancer drugs in development, talazoparib and pidilizumab, the first in advanced trials for breast cancer, and the second in the hot area of immuno-oncology.

The IBB, the exchange-traded fund that tracks the Nasdaq Biotechnology Index, rose more than 2 percent Monday morning, on pace for its best performance in almost a month. After Medivation, which was trading up about 20 percent, it was led by Regeneron, Incyte, Celgene and BioMarin — themselves all potentially targets...