With Allergan (AGN) and Pfizer (PFE) calling off plans to merge this week, the biotech sector rallied in a big way. Why? In part, Allergan is now back in the fray as a potential acquirer, with some serious capital to put to work. Assuming the sale of their generic drug business to Teva (TEVA) goes through in the first half of the year, Allergan will have north of $35 billion to put to work in acquisitions and partnerships. Within a day Allergan has already put up $125 million for rights to early Alzheimer’s drugs (muscarinic agonists) from Heptares.
Anticipating impending acquisitions, the NASDAQ Biotech Index Fund (IBB) rose 5% on Wednesday;XBI (SPIDR Biotech Index Fund) rose almost 7%. Both gave back some of those gains on Thursday.
We’ve been outlining over the last two months the intermediate-term long trade.Recall that we had written in early March that this $285-290 area for IBB was a likely place to watch for a pause and consolidation (read more here), or even short-term peak. 
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