NEW YORK ( TheStreet) -- With three weeks until 2015, Merck ( MRK) stunned investors Monday with its $9.5 billion deal for antibiotic maker Cubist Pharmaceuticals ( CBST) . But no one should have been surprised.
While the health care sector leads all major groups with year-to-date gains of 27.6%, according to Fidelity Investments, investors should remember 2014 more for the number of mergers and acquisitions (M&A) and -- at times -- the asset swapping that has taken place.
This year, drugmakers with plenty of cash but short on growth have bought quick access to products and markets that would have otherwise taken years to build. One of the earlier deals occurred in April when Zimmer Holdings (ZMH) picked off orthopedic device maker Biomet for $13.4 billion.
Let's not forget how some of these fierce rivals can partner up overnight when it comes to swapping assets. In April GlaxoSmithKline (GSK) and Novartis (NVS) agreed to swap assets, allowing Glaxo to strengthen its vaccines business, while Novartis built up its position in cancer drugs.
Acquiring assets of one company is often the focus of these deals. In June, Merck spent $3.9 billion to buy biotech firm Idenix Pharmaceuticals (IDIX) . In October, Endo Pharmaceuticals (ENDP) acquired Auxilium Pharmaceuticals (AUXL) for $2.6 billion in October, paying an 18% premium to its previous bid of $2.2 billion offered in September. In total, Auxilium shareholders received a 52% premium for their shares.
The price, however, rarely means anything to the acquirer. They're more focused on what they're getting for their money.
For Endo, its branded drug business was under attack from generic competition, posting a 40% year-over-year decline in the most recent quarter. With the deal, Endo addressed its weak pipeline situation with fresh new products that can deliver long-term growth. At the same time, it raised its investment profile, given that it will save roughly $175 million per year.