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M&A could help biotech keep rolling, traders say after Biogen rumors

The "Fast Money" traders said on Tuesday that mergers and acquisitions may keep pushing the biotechnology sector to new highs.

The iShares Nasdaq Biotechnology ETF (IBB) hit a high of $299 a share on Tuesday, its highest level since mid-January. The traders made their comments after Biogen shares jumped 9 percent Tuesday on a Wall Street Journal report of buyout interest from drug companies, including Merck and Allergan. A source later told CNBC that Allergan is unlikely to pursue the deal.

Trader Tim Seymour said that the Biogen deal "makes sense whether it happens or not."

He said, however, that M&A activity has been a part of the gains in the sector "for a long time." He explained that the industry saw less activity as it faced increased scrutiny from politicians and regulators.

"You've gotten to a place where moving the needle for some of these big biotech companies and big pharma is very, very difficult. There's no longer one big drug and therefore the pipelines need a lot more," Seymour said.

Trader Brian Kelly said that Tuesday's price action is "a big move for the size of the company." He stuck to his investment strategy of selling the biotech stocks on any strength because of the political risks heading into the general election. Kelly said, however, he wouldn't necessarily short the stocks.

Trader Guy Adami said that while the takeover interest is specific to Biogen, other companies in the sector look interesting. He said that Gilead Sciences has an "unbelievable balance sheet" and that the company could "make a move."

Disclosures:

TIM SEYMOUR

Tim Seymour is long APC, AVP, BAC, BBRY, CLF, DO, DVYE, EDC, EWZ, F, FB, FCX, FXI, GM, GOOGL, GRMN, GE, INTC, LQD, M, MCD, MPEL, NKE, RACE, RAI, RH, RL, SINA, T, TWTR, UA, VALE, VZ, XOM and short: SPY, XRT. His firm is long ABX, BABA, BIDU, CLF, EWZ, F, HD, KO, MCD, MPEL, NKE, PEP, PF, SAVE, SBUX, SINA, VALE, VIAB, WMT, WEN, YHOO, short HYG, IWM

KAREN FINERMAN

Karen Finerman is long AAL, BAC, C, DAL, DRII, DRII calls, FB, FL, GOOG, GOOGL, JPM, LYV, KORS, KORS, KORS puts, M, MA, SEDG, SPY puts, UAL, URI, WIFI long call spreads. Her firm is long ANTM, AAPL, BAC, C, C calls, DRII, DRII calls, FB, GOOG, GOOGL, JPM, JPM calls, KORS, LYV, M, MOH, PLCE, SPY puts, URI, WIFI. Her firm is short IWM, MDY. Finerman is on the board of GrafTech International.

BRIAN KELLY

Brian Kelly is long Bitcoin, DXJ, GLD, SLV, US Dollar UUP. He is short the Swiss franc, euro and Japanese yen.

GUY ADAMI

Guy Adami is long CELG, EXAS, GDX, INTC. Adami's wife, Linda Snow, works at Merck.