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Kensho Stats

How to trade Pfizer acquisition news

A man walks past Pfizer's world headquarters in New York.
Andrew Kelly | Reuters
A man walks past Pfizer's world headquarters in New York.

Shares of biotech companies rose Monday after Pfizer announced a $14 billion deal to acquire cancer drug manufacturer Medivation. Given the news, the rally in the sector may not be over, if history is any guide.

Since 2002, there have been seven major acquisitions by Pfizer, all valued at more than $1 billion.

According to data from Kensho, a quantitative tool used by hedge funds to spot historical trading patterns, a group of companies could be in for some gains.

Here's what we found.

One week after a major acquisition by Pfizer, the Nasdaq biotechnology ETF, the IBB, traded higher in every instance but one and returned 1.4 percent on average, by far outperforming the S&P 500, which traded lower on most of the occasions and lost an average of 1.8 percent.

Longer term — one month later — the IBB ETF returned 6.5 percent on average versus the S&P 500's meager 0.3 percent, according to Kensho.

Select stocks in the biotech space have been even bigger winners on the back of big Pfizer deals.

In the more immediate, one-week time frame, Celldex Therapeutics, Isis Pharma, Vertex Pharmaceuticals and Regeneron reliably see big gains.


One month later, Isis and Vertex continued to gain ground.


Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.