Investing in biotech stocks and companies is so much like gambling, the risk is sometimes not worth it. Why not mitigate the risk and invest in an exchange traded fund (ETF) instead, which will give investors exposure to several companies at once.[Dissipate The Risk In Biotechnology With ETFs.]
According to MinyanVille, the process of New Drug Application (NDA) is very important for the future of the drug or biotech company. NDA filings do not just “happen,” but come after years of studies are done with positive results. Often, big moves in biotech stocks come from successful stages of drug development. The biggest risk is one unsuccessful stage, which can send a company back to square one. The biggest reward is approval, of course.
The unfortunate reality is that many biotech companies are cash-starved businesses that are ultimately at the mercy of the Food and Drug Administration (FDA) approving their drug in order to have any hope for profitability, states Patrick Henderson for The San Francisco Gate. Factors such as economic volatility, healthcare reform, barriers to early-stage financing of innovation, and an increasingly hostile reimbursement environment all contribute to uncertainty in the biotech industry.[5 Biotechnology ETFs To Play Innovation.]
This is where ETFs come in. According to the Business Standard, the global biotech outlook is looking ripe, as India is on tap to become a hub of major merger and acquisition activity. Likewise, there are 270 bio pharmaceutical alliances globally, of which 93 involved at least one Asian country.
- iShares Nasdaq Biotechnology (NASDAQ: IBB)
- SPDR S&P Biotech ETF (NYSEArca: XBI)
- First Trust Amex Biotech (NYSEAca: FBT)
Tisha Guerrero contributed to this article.