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ETFs to Capitalize on Eli Lilly's Buyout of DICE Therapeutics
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Eli Lilly and Co. (LLY - Free Report) , a global leader in pharmaceuticals, has agreed to acquire DICE Therapeutics , a clinical-stage biopharmaceutical company, in a cash deal worth approximately $2.4 billion. This strategic move is part of Eli Lilly's efforts to bolster its immunology pipeline, specifically targeting immune disease-related treatments.
Following the deal announcements, DICE shares advanced to a record high of $46.75, while LLY shares gained nearly 1%. This put the spotlight on healthcare ETFs, which could be the best way for investors to tap the opportunity arising from the proposed deal. Investors should keep a close eye on the movement of ETFs like Harbor Health Care ETF (MEDI - Free Report) , Horizon Kinetics Medical ETF (MEDX - Free Report) , iShares U.S. Healthcare ETF (IYH - Free Report) , Health Care Select Sector SPDR Fund (XLV - Free Report) , and VanEck Vectors Pharmaceutical ETF (PPH - Free Report) in the coming weeks.
Deal in Focus
Per the terms of the deal, Eli Lilly will pay $48 per share for DICE, a 39.1% premium to the stock’s closing price on Jun 16. The transaction is expected to be closed in the third quarter, subject to regulatory clearances (read: 4 Sector ETFs & Stocks to Bet on Superb May Jobs Data).
The acquisition allows Eli Lilly to gain a potentially best-in-class oral treatment for psoriasis, further strengthening its immunology portfolio. It is mainly centered around DICE's lead drug, DC-806, an oral pill currently being tested in mid-stage trials to treat psoriasis. With the promising DC-806 in mid-stage trials, this deal could potentially bring significant benefits to both companies and to patients suffering from psoriasis.
The DC-806 drug has shown promise in Phase 1 clinical trials, with a mean percentage reduction in Psoriasis Area and Severity Index (PASI) from baseline at 4 weeks of 43.7% in the high dose group compared to 13.3% in the placebo group. Based on this promising Phase 1 data, DC-806 is expected to advance into a Phase 2b clinical trial in the first half of 2023.
Eli Lilly's shares have surged 62% since the beginning of 2022, largely driven by hopes for its obesity drug, Mounjaro. This deal could contribute to further growth. For DICE Therapeutics, the acquisition provides a significant cash influx and the opportunity to leverage Eli Lilly's extensive resources and market presence. DICE expects to continue its work on DC-806 and other projects under the Eli Lilly umbrella.
This acquisition comes at a time when the U.S. Federal Trade Commission is increasing its scrutiny of pharma sector buyouts, especially large ones. However, due to the early-stage nature of DICE Therapeutics and the lack of therapeutic redundancy, this deal is expected to escape such issues.
Harbor Health Care ETF is actively managed and primarily invests in the securities of companies principally engaged in the research, development, production or distribution of products and services related to the health care industry. It holds 37 stocks in its basket with Eli Lilly occupying the second position at 14.7% share.
Harbor Health Care ETF has accumulated $4.4 million in its asset base and charges 80 bps in annual fees. It trades in average daily volume of 500 shares.
Horizon Kinetics Medical ETF seeks long-term growth of capital and is an actively-managed fund that invests primarily in patented first-line pharmaceuticals and biologics, as these products tend to have high-profit margins and significant barriers to entry. The fund employs a long-term perspective, seeking to capture returns of intrinsic valuation realization and scientific discovery. MEDX holds 38 stocks in its basket, with LLY taking the top spot at 8.2% of the portfolio.
With AUM of $19.4 million, Horizon Kinetics Medical ETF trades in average daily volume of 3,000 shares and charges 85 bps in annual fees.
iShares U.S. Healthcare ETF offers exposure to 111 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies by tracking the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. Here again, Eli Lilly is the third firm, accounting for 7.4% of the total assets. In terms of industrial exposure, pharma takes the top spot at 30.8%, followed by healthcare equipment (20.3%) and biotech (17.2%).
iShares U.S. Healthcare ETF has amassed $3.2 billion in its asset base, while charging 39 bps in annual fees. It trades in a moderate volume of around 40,000 shares a day and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Health Care Select Sector SPDR Fund is the most-popular healthcare ETF and follows the Health Care Select Sector Index. It holds 65 securities in its basket, with LLY taking the third spot at 7.2% of the assets. Pharma takes the largest share at 31% from a sector look, while healthcare equipment and supplies, healthcare providers and services, biotech and life sciences tools & services have double-digit exposure each (read: Buy These 3 Top-Ranked ETFs and Never Sell).
Health Care Select Sector SPDR Fund manages $41 billion in its asset base and trades in a heavy volume of around 9 million shares. The expense ratio comes in at 0.10%. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
VanEck Vectors Pharmaceutical ETF follows the MVIS US Listed Pharmaceutical 25 Index, which measures the performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well as production, marketing and sales of pharmaceuticals. It holds 26 stocks in its basket, with Eli Lilly occupying the second position at 5% of assets.
VanEck Vectors Pharmaceutical ETF has amassed $385.2 million in its asset base and trades in a good volume of about 115,000 shares a day. The expense ratio is 0.36%. VanEck Vectors Pharmaceutical ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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ETFs to Capitalize on Eli Lilly's Buyout of DICE Therapeutics
Eli Lilly and Co. (LLY - Free Report) , a global leader in pharmaceuticals, has agreed to acquire DICE Therapeutics , a clinical-stage biopharmaceutical company, in a cash deal worth approximately $2.4 billion. This strategic move is part of Eli Lilly's efforts to bolster its immunology pipeline, specifically targeting immune disease-related treatments.
Following the deal announcements, DICE shares advanced to a record high of $46.75, while LLY shares gained nearly 1%. This put the spotlight on healthcare ETFs, which could be the best way for investors to tap the opportunity arising from the proposed deal. Investors should keep a close eye on the movement of ETFs like Harbor Health Care ETF (MEDI - Free Report) , Horizon Kinetics Medical ETF (MEDX - Free Report) , iShares U.S. Healthcare ETF (IYH - Free Report) , Health Care Select Sector SPDR Fund (XLV - Free Report) , and VanEck Vectors Pharmaceutical ETF (PPH - Free Report) in the coming weeks.
Deal in Focus
Per the terms of the deal, Eli Lilly will pay $48 per share for DICE, a 39.1% premium to the stock’s closing price on Jun 16. The transaction is expected to be closed in the third quarter, subject to regulatory clearances (read: 4 Sector ETFs & Stocks to Bet on Superb May Jobs Data).
The acquisition allows Eli Lilly to gain a potentially best-in-class oral treatment for psoriasis, further strengthening its immunology portfolio. It is mainly centered around DICE's lead drug, DC-806, an oral pill currently being tested in mid-stage trials to treat psoriasis. With the promising DC-806 in mid-stage trials, this deal could potentially bring significant benefits to both companies and to patients suffering from psoriasis.
The DC-806 drug has shown promise in Phase 1 clinical trials, with a mean percentage reduction in Psoriasis Area and Severity Index (PASI) from baseline at 4 weeks of 43.7% in the high dose group compared to 13.3% in the placebo group. Based on this promising Phase 1 data, DC-806 is expected to advance into a Phase 2b clinical trial in the first half of 2023.
Eli Lilly's shares have surged 62% since the beginning of 2022, largely driven by hopes for its obesity drug, Mounjaro. This deal could contribute to further growth. For DICE Therapeutics, the acquisition provides a significant cash influx and the opportunity to leverage Eli Lilly's extensive resources and market presence. DICE expects to continue its work on DC-806 and other projects under the Eli Lilly umbrella.
This acquisition comes at a time when the U.S. Federal Trade Commission is increasing its scrutiny of pharma sector buyouts, especially large ones. However, due to the early-stage nature of DICE Therapeutics and the lack of therapeutic redundancy, this deal is expected to escape such issues.
ETFs in Focus
Let’s delve into each ETF below:
Harbor Health Care ETF (MEDI - Free Report)
Harbor Health Care ETF is actively managed and primarily invests in the securities of companies principally engaged in the research, development, production or distribution of products and services related to the health care industry. It holds 37 stocks in its basket with Eli Lilly occupying the second position at 14.7% share.
Harbor Health Care ETF has accumulated $4.4 million in its asset base and charges 80 bps in annual fees. It trades in average daily volume of 500 shares.
Horizon Kinetics Medical ETF (MEDX - Free Report)
Horizon Kinetics Medical ETF seeks long-term growth of capital and is an actively-managed fund that invests primarily in patented first-line pharmaceuticals and biologics, as these products tend to have high-profit margins and significant barriers to entry. The fund employs a long-term perspective, seeking to capture returns of intrinsic valuation realization and scientific discovery. MEDX holds 38 stocks in its basket, with LLY taking the top spot at 8.2% of the portfolio.
With AUM of $19.4 million, Horizon Kinetics Medical ETF trades in average daily volume of 3,000 shares and charges 85 bps in annual fees.
iShares U.S. Healthcare ETF (IYH - Free Report)
iShares U.S. Healthcare ETF offers exposure to 111 U.S. healthcare equipment and services, pharmaceuticals, and biotechnology companies by tracking the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. Here again, Eli Lilly is the third firm, accounting for 7.4% of the total assets. In terms of industrial exposure, pharma takes the top spot at 30.8%, followed by healthcare equipment (20.3%) and biotech (17.2%).
iShares U.S. Healthcare ETF has amassed $3.2 billion in its asset base, while charging 39 bps in annual fees. It trades in a moderate volume of around 40,000 shares a day and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Health Care Select Sector SPDR Fund (XLV - Free Report)
Health Care Select Sector SPDR Fund is the most-popular healthcare ETF and follows the Health Care Select Sector Index. It holds 65 securities in its basket, with LLY taking the third spot at 7.2% of the assets. Pharma takes the largest share at 31% from a sector look, while healthcare equipment and supplies, healthcare providers and services, biotech and life sciences tools & services have double-digit exposure each (read: Buy These 3 Top-Ranked ETFs and Never Sell).
Health Care Select Sector SPDR Fund manages $41 billion in its asset base and trades in a heavy volume of around 9 million shares. The expense ratio comes in at 0.10%. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
VanEck Vectors Pharmaceutical ETF (PPH - Free Report)
VanEck Vectors Pharmaceutical ETF follows the MVIS US Listed Pharmaceutical 25 Index, which measures the performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well as production, marketing and sales of pharmaceuticals. It holds 26 stocks in its basket, with Eli Lilly occupying the second position at 5% of assets.
VanEck Vectors Pharmaceutical ETF has amassed $385.2 million in its asset base and trades in a good volume of about 115,000 shares a day. The expense ratio is 0.36%. VanEck Vectors Pharmaceutical ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.