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Prescription for pharma profits: Go big

Big pharma targets and takeovers

The pharma M&A scene is heating up. Pfizer has reportedly made a second offer to purchase British pharmaceuticals giant AstraZeneca in a deal valued at just under $100 billion. If the deal goes through, it would be the largest purchase ever of a U.K. company.

"We've seen three types of deals occurring: A growth type of deal for new products, a strategy type of deal like Novartis and Glaxo and a synergy type of deal like Valeant and Allergan, where a company can cut costs and drive revenue," said John Eade, Argus Research president on CNBC's "Fast Money."

He explained that while mid-cap companies are more affordable, large cap companies that offer cost-cutting benefits on the regulatory and marketing sides are very alluring.

"I think Bristol-Myers, it's the biggest of my three picks. It's an $80 billion company. It's more of a cost-savings deal. Bristol-Myers operating margins are about half of what we see others in the industry make," added Eade.