2Q Financial Markets Preview: Post-Genentech world

Three or four weeks ago, the two most anticipated triggers for the second quarter were Genentech Inc.'s Avastin adjuvant colorectal cancer data and what price Roche ultimately would pay to acquire the biotech. But with events constantly overtaking analysis these days, the big questions now are what investors are going to do with the $95 a share they're getting for Genentech, as well as the $45 billion in cash that will be freed up by Pfizer Inc.'s $68 billion cash and stock acquisition of Wyeth and the $18.3 billion in cash from Merck & Co. Inc.'s $41.1 billion cash and stock purchase of Schering-Plough Corp.

The consensus is that perhaps 25% of the Genentech cash is headed back into the sector and the rest going into other investments or under the mattress. Big pharma, top tier biotechs and development companies that are well capitalized are the most likely beneficiaries, with bankers expecting an uptick of follow-ons, PIPEs, VIPEs and other types of offerings by select companies from the mid-tier on down looking to take advantage of any loose cash...