Their cutting-edge drug portfolios and profitable relationships with industry heavyweights make these two rapidly advancing biotech companies prime takeover targets. 

2015 will go down as a record year for M&A activity by dollar volume when the all is said and done. As an investor, this concerns me as this type of activity almost always peaks near market tops, 2007 and early 2000 being good recent examples. However, as the previous head of Citigroup once famously quipped just before the start of the financial crisis “As long as the music is playing, you have to dance.”

Nowhere has deal flow been more robust than in the Pharma and Biotech sectors of the market. There have been myriad small and mid-tier deals along with the biggest merger of the year from these sectors as Pfizer Inc. (NYSE: PFE) and Allergan (NYSE: AGN) have decided they will merge in a so-called inversion deal worth about $155 billion that would create the world’s biggest drug maker by sales.

What is amazing about the activity in these sectors is it could actually have easily been higher this year except that some high profile acquisitions did not take place. For example,Mylan (NYSE: MYL) rejected Teva Pharmaceuticals (NASDAQ: TEVA) advances to create a generic drug behemoth, instead Teva bought Allergan’s generic drug business for over $40 billion. Mylan was in turn spurned by Perrigo Group (NASDAQ: PRGO) in an over $10 billion deal.

There are numerous factors driving these combinations. The desire to achieve a lower tax rate is one as the United States has the highest corporate tax rate in the developed world, even if it produces 70% of the world’s patents for new drugs. Pfizer estimates it will save some $2 billion annually from purchasing Allergan and moving its corporate domicile to Ireland. The need to replenish pipelines, robust free cash flow at large biotech/pharma companies and low financing rates are also tailwinds.