Talk about a winter of discontent…
Over the past seven weeks, we’ve seen quite possibly one of the best examples of stock market fear in history.
Actually, it’s not fear. It’s pure irrationality, as top-quality stocks have been spanked down to bargain-basement levels, despite no discernable change in their businesses.
But business is still booming in the biotech sector…
Over that time, we’ve seen three huge buyouts occur in the Big Pharma/biotech area…
It started in January, with the news that Pfizer (NYSE: PFE) would shell out $68 billion to buy Wyeth (NYSE: WYE).
And things really got rolling this week, with the news that Merck (NYSE: MRK) will acquire Schering-Plough (NYSE: SGP) for $48 billion and that Roche and Genentech (NYSE: DNA) have finally concluded protracted negotiations that will see Roche buy the biotech superpower for $47 billion.
Total value of done deals: $163 billion. And in a market where access to capital has supposedly dried up.
The question is: Could these Big Pharma mergers signal a shift in sentiment and a bottom for the broader stock market?
If you’re looking for a simple, one-word answer… no.
But if you don’t take your investment advice from such in-depth, hard-hitting features as the “Lightning Round,” I invite you to keep reading…
The Credit Is There… But Only For The Right Deal
There’s no doubt that it’s tough to get credit these days. But as the merger deals above show, capital is clearly available for the right deals.
For example, in order to finance its deal with Genentech, Roche issued nearly $33 billion in notes. In addition, Pfizer received over $22 billion in loan commitments from various banks to complete its transaction. And similarly, J.P. Morgan (NYSE: JPM) slapped down $8.5 billion so Merck could fund its deal with Schering-Plough.
Again, this has occurred during one of the most fear and panic-ridden periods in stock market history. And it’s come despite frequent comparisons of the Depression Era. Listen to the media too much and you’d expect to see the world in a grainy, brown hue every time you look out the window.
Don’t get me wrong here: I’m keenly aware that the economy is in bad shape. No one has ever accused me of being a Polyanna.
