Can Obama’s Push Reignite Biotech and Health Care ETFs?
June 15th 2009 at 12:00pm by Tom Lydon
Biotechnology and health care-related exchange traded funds (ETFs) could be set to take off as both sectors are in a transition period and are gaining more support from the Obama administration.
President Barack Obama today met with the American Medical Association about his proposal for government-run health care, which would cut costs and heighten competition, reports Judy Keen for USA Today. But the AMA doesn’t support the plan and fears it could make the health care situation in this country even worse.
Obama’s plan calls for a health insurance exchange in which private plans compete with a public option. It would ideally drive down costs while expanding choices. The AMA says that if private insurers can’t compete with a government-run plan, there would be an explosion of costs that would have to be absorbed by taxpayers.
- PowerShares Dynamic Healthcare (PTH): down 4.7% year-to-date
Meanwhile, changes are afoot in the biotechnology industry, as well. The sector has been able to turn a profit only once over the past four decades. So why are 27 different states paying as much as $100,000 each to entice companies onto the exhibition floor of a biotech convention?
The biotechnology industry is the so-called grail of economic development, and cities are betting taxpayer money on research parks and wet laboratories. Shaila Dewan for The New York Times reports that there are two problems with the race for biotech in these cities:
- The industry is highly concentrated in established epicenters like Boston, San Diego and San Francisco, which offer not just scientific talent but also executives who know how to steer drugs through the long approval process. Getting that top talent to move to other cities might be a challenge.
- Biotech is a small industry with a lengthy product-development process, and even in its largest clusters offers only a fraction of the jobs of traditional manufacturing. In the United States, only 43 biotechnology companies employ more than 1,000 people.
Nevertheless, biotech stocks and ETF continue to enjoy the rally, with shares of Human Genome Science (HGSI) rocketing 20%, and the Amex Pharmaceutical Index up 2%. Late Wednesday, a Food and Drug Administration advisory panel recommended that two leading psychiatric medications – AstraZeneca’s Seroquel and Eli Lilly’s Zyprexa – be approved for use in teenagers and certain children suffering from bipolar disorder or schizophrenia, reports Val Brickates Kennedy for The Wall Street Journal.
A few biotech-realetd ETFs:
- PowerShares Dynamic Biotech & Genome Portfolio (PBE): down 0.4% year-to-date
- SPDR S&P Biotech (XBI): down 8.5% year-to-date
- iShares Nasdaq Bioetch ETF (IBB): down 0.9% year-to-date
For more stories on biotechnology, visist our biotechnology category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.