This week, Wood Mackenzie, an Edinburgh-based research and consulting firm, reviews recent trends in biotechnology stocks.

The Nasdaq Biotechnology Index has been rising steadily, and is now up 10% from the end of August. This contrasts with a lack-lustre period from May onwards, and has a wide spread, with share prices up at 20 of the 25 most heavily weighted companies in the index.

The share gains reflect speculation that cash-rich pharmaceutical giants are set to buy up biotechnology firms to bolster weak drug-development pipelines and product portfolios threatened by competition from generic drugs.

This perspective was borne out on 12 October when Biogen Idec, the world's fifth biggest biotechnology company, said it was putting itself up for sale. Based in Cambridge, Massachusetts, the firm says that its sale is likely to offer shareholders better value than would be realized by the company's own strategic growth plans.

Biogen Idec's shares jumped by almost 19% overnight on the announcement, with Pfizer touted as the most likely suitor. Sanofi-Aventis, Novartis, Johnson & Johnson and GlaxoSmithKline are also rumoured to be interested, but Pfizer is the most obvious buyer because drugs that account for about half of its revenue are expected to be facing generic competition by 2011. Of Biogen Idec's five approved drugs, two ? Avonex and Tysabri ? are treatments for multiple sclerosis, an area of strong strategic interest to Pfizer.

With Biogen Idec currently worth some $23 billion, any acquisition would be the largest in the drug sector this year, pipping the $15-billion acquisition of MedImmune by AstraZeneca in April. And investors are betting that it would be just the first in a wave of biotechnology acquisitions by major pharmaceutical companies.