Biotech Stocks Will be Fueled by Takeovers in 2011

While a number of companies are on the verge of hitting the market with exciting new drug products or medical treatments, the biggest 2011 profits for investors in the biotech stocks are more likely to come from mergers and acquisitions (M&A) than research and development (R&D). That's because mergers and buyouts in the industry have far outpaced the sector's overall growth rate, which in recent years has been sluggish. Indeed, IMS Health, a leading research and analytical firm serving the pharmaceutical and medical industries, projects only a slight increase in worldwide growth in 2011 - 5% to 7% versus a pace of 4% to 5% this year - with a similarly restrained outlook stretching out to 2015. By contrast, virtually every major player in pharmaceuticals worked at least one M&A deal in 2010. That trend is expected to continue, if not accelerate, in the years ahead as drug companies look to broaden product lines, replace revenues lost to patent expiration and expand into emerging markets, where the industry growth rate is much higher in than in the developed nations.