7 Reasons Biotechnology ETFs Could Succeed

The biotechnology sector and exchange traded funds (ETFs) have had a good summer so far. Some funds are up as much as 22% in the last month alone. Will it continue?

July was kind to the biotech sector. The NYSE Biotechnology Sector rose up 24%, which dwarfed the 6% for the S&P 500. Sam Subramanian for iStockAnalyst reports that a host of favorable clinical trial results were the biggest drivers, with a large buyout announcement an even bigger ray of light.

The largest biotech-pharma merger was the Roche-Genetech deal. Meanwhile the Medarax takeover sent shares up 90% after the announcement was made.

Is it too late to jump in?

Subramanian says that there are some factors favoring biotech companies right now:

• An aging population
• Rising cancer rates
• Rising degenerative disease rates
• An increasing understanding that biotechnology offers some of the best solutions for disease management
• The potential for more “blockbuster drugs” is in place
• Biotech companies are looking to expand the uses of some drugs to treat more than just one disease
• Biotech drugs are, to a degree, safe from generic competition

If you do decide that biotech is an area you’d like exposure to, mind the trend lines and have a strategy to protect yourself.

• PowerShares Dynamic Biotech & Genome (PBE): up 18.4% year-to-date

• iShares NASDAQ Biotechnology (IBB) up 10% year-to-date

For more stories about biotech, visit our biotechnology category.