A reputable biotechnology company has filed for Chapter 11 this week, deCODE Genetics Inc (NYSE: DCGN), the company that famously compiled the genetic code of nearly every Icelander for research. The company crushed under $200 million in debt and investors may have to call it a wash, reports Brettt Arends for The Wall Street Journal. (What does biotech need to thrive?)

For other companies in the sector, the outlook is looking brighter. IPOs are coming back and some of the speculative companies have surged off their lows.

Talecris Biotherapeutics (NYSE: TLCR) just raised $950 million, a sign that investors are ready to wade back into the markets again.

Biotech can be a risky sector with mixed investment results. Many companies are working on projects that may one day bring profits, but those projects may not see the light of day for years, if ever.

That’s where ETFs come in. How can anyone know which biotechnology companies will be winners in the long run? ETFs help spread out the risk and eliminate the need for guesswork and single-stock picking. (Read more about the biotechnology sector).

If you decide this sector is right for your investment needs, go in with a strategy in place and a stop-loss in mind. (How to follow the trends).

For more stories about biotechnology, visit our biotechnology category.

• PowerShares Dynamic Biotech & Genome (NYSEArca: PBE): up 18.2% year-to-date

• SPDR S&P Biotechnology (NYSEArca: XBI): down 4.5% year-to-date

ETFs are a good way for investors to capitalize on policy initiatives of the Obama administration while reducing the day-to-day volatility compared to other investment options, such as stocks, remarks Daniel Harrison for IndexUniverse. (Play Obama’s new energy plan).

Health Care opportunities. Jim Oberweis, chief executive of Oberweis Asset Management, believes that “there is a possible positive [outcome] for pharmaceutical companies” since sales of prescription drugs will increase as health care coverage widens. Furthermore, Oberweis argues that health care providers may benefit from more patient visits and biotechs are in a more positive position than previously thought. (More on the health care sector).

Broad-based and niche market ETFs that could benefit from the growth in the number of patients receiving coverage include:

• Health Care Select Sector SPDR (NYSEArca: XLV): up 14.3% year-to-date
• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): up 15.1% year-to-date
• iShares Dow Jones U.S. Medical Devices (NYSEArca: IHI): up 32.4% year-to-date; IHI is well-diversified, with 58% of assets under management in its top 10 holdings, and a maximum single-stock weighting of 10%. Companies included should benefit from the increase in the number of hospital patient visits.
• PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP): up 10.3% year-to-date; PJP is a well-diversified ETF on large, mostly dividend-paying pharmaceutical companies that have lots of cash on hand and may see an increase in sales of core prescription drugs.
• SPDR S&P Pharmaceuticals (NYSEArca: XPH): up 19.2% year-to-date; XPH is more broadly diversified.
• iShares Dow Jones US Pharmaceuticals (NYSEArca: IHE): up 22.2% year-to-date; IHE focuses more on the oversold traditional pharma brands like PJP.
• SPDR S&P Biotech (NYSEArca: XBI): down 4.3% year-to-date; XBI is well-diversified, with 45% of its funds invested in its top 10 holdings. The fund is also mostly invested in nontraditional pharma companies.
• iShares Nasdaq Biotechnology (NasdaqGM: IBB): up 11.2% year-to-date; IBB has a higher weighting in its top holdings and it focuses exclusively on Nasdaq-listed securities; some large biotech companies may be excluded.

Clean energy. It is no big secret that clean energy is a big policy initiative of the Obama administration. The more notable technologies being pushed into the forefront of the sector are nuclear and solar energy. Solar tech investing is still considered risky because of the industry’s mini boom/bust cycles, but ETFs help minimize volatility. (More on alternative energy).

• Market Vectors Solar Energy ETF (NYSEArca: KWT): down 6.5% year-to-date
• Claymore/MAC Global Solar Energy (NYSEArca: TAN): up 0.3% year-to-date
• Market Vectors Nuclear Energy ETF (NYSEArca: NLR): up 19.7% year-to-date

Max Chen contributed to this article.

According to Don Dion for The Globe and Mail, he’s chosen his top five ETFs based on the fact that he feels they capture their theme, provide liquidity and exploit the advantages of the ETF model. This is by no means a conclusive list – there are many, many worthy ETFs out there.

These five ETFs address important themes in the financial world of today:

Biotech. iShares Nasdaq Biotechnology (NasdaqGM: IBB) is up 11% year-to-date. Biotechs include many start-up companies that burn out, but a lucky few do strike it rich. Instead of shifting through all the possible companies, the ETF offers a great way to pick up the sector.

TIPs. iShares Barclays TIPS Bond (NYSEArca: TIP) is up 7.1% year-to-date. This fund tracks securities that range in duration from one to 20 years. Indiividual TIPs bonds are taxed on inflation adjustment and TIP distributes inflation-adjustment as income.

India. WisdomTree India Earnings (NYSEArca: EPI) is up 85.8% year-to-date. The fund offers access to the Indian equity market while allowing for the limitations that foreigners might have on investing. Potential investors should note that emerging market equities tend to be more volatile.

Gold. SPDR Gold Shares (NYSEArca: GLD) is up 15.4% year-to-date. Gold has been the talk of the markets these days. Buying gold is a good way to diversify a portfolio. GLD tracks the price of gold stockpiles, so investors won’t be tracking the price through derivative holdings.

S&P 500. SPDRs S&P 500 (NYSEArca: SPY) is up 16.7% year-to-date. The fund has been providing low-cost exposure to the S&P 500. SPY is a good proxy for the market as a whole and Dion believes it to be a must-have fund for any well-rounded ETF portfolio.

Max Chen contributed to this article.

For full disclosure, Tom Lydon’s clients own shares of GLD and SPY.

Analysts estimate that nearly half of all biotechnology firms have insufficient cash on hand to last them one year. As a result, they’re turning to creative ways to raise cash and alternative exit strategies in order to bring their products to market, states Sumantha Sedor of Genetic Engineering and Biotechnology News.

It isn’t all bad news for the sector, though:

• According to the second quarter 2009 MoneyTree Report, investments in the life sciences sector, which combines the biotechnology and medical devices industries, represented the highest percentage of total venture capital investments since 1995 and increased 47% to $1.5 billion from the previous quarter.

• Strategic partnering can be a way around these issues.  For example, at the end of July, Amgen (AMGN) and GlaxoSmithKline (GSK) entered into a major partnering relationship to commercialize denosumab, Amgen’s product for the treatment of postmenopausal osteoporosis. GSK will pay initial and near-term commercial milestones to Amgen totaling $120 million to share profits in Europe, Australia, New Zealand, and Mexico and to register, commercialize, and sell the drug in countries where Amgen has no presence, such as China, Brazil, India, Taiwan and South Korea.

Although times may be tough for the sector, creativity and strategic alliances could enable biotechnology to survive.  To access the sector, take a look at the following ETFs:

• SPDR S&P Biotech (XBI): down 0.5% year-to-date.

• PowerShares Dynamic Biotech & Genome (PBE): up 19.1% year-to-date.

For more stories on biotechnology, visit our biotechnology category.

Kevin Grewal contributed to this article.

Gary Gordon of ETF Expert outlines these three sectors below:

• The first sector is Chinese real estate, represented by the Claymore AlphaShares China Real Estate (TAO). TAO has reaped the benefits of China’s infrastructure stimulus package, which has created jobs and transferred state-owned stock wealth to citizens, enabling them to purchase real estate.

• The second sector is gold, whose performance can be illustrated by the Market Vectors Gold Miners ETF (GDX), which boasts a one-year gain of 6.5% and has reaped the benefits of inflationary worries and concerns. Gold is seen as a popular hedge in an inflationary environment.

• The last sector is biotechnology, which Gordon states has a low correlation with the S&P 500, enabling the sector to mitigate its inherent risks.  The First Trust Amex Biotechnology Index (FBT) has a one-year gain of 4.8%.

For more stories about these topics, visit our China, gold and biotechnology categories.

Kevin Grewal contributed to this article.

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.

ETF Spotlight on PowerShares Dynamic Biotech & Genome (PBE), part of a weekly series.

Holdings: This fund invests in companies involved in the biotechnology and genome sectors. Some of the top components include ImmunoGen (IMGN), Amgen (AMGN), Gilead Sciences (GILD) and Biogen (BIIB).

Objective

This fund tracks the Biotechnology & Genome Intellidex Index

What’s Good

• The biotechnology sector has created more than 200 new therapies and vaccines, according to a report by BIO
• Biotechnology also benefits farmers and consumers; environmental biotechnology helps clean up hazardous waste
• The market cap of public biotech companies was at $360 billion in April 2008
• The biotech industry has exploded since 1992: revenues rose from $8 billion back then to $58.8 billion in 2006

The Latest News

• Ruben Dagda for The Examiner reports that the biotechnology industry has proven as a safe  industry even in these rough economic times. Both the health care and biotechnology industries have been among the least hard-hit in terms of job losses and contraction, although it’s far from recession-proof.

• The Obama administration claims that biologic drugs should be subject to generic competition after seven years, citing the potential for reducing health care costs, Catherine Larkin for Bloomberg. Currently, biologics can’t be copied even if patents have expired because biologics makers say the medicines can’t be replicated like conventional pills can.

• According to the Federal Trade Commission, generic biologics could be sold at 10% to 30% discounts without taking market share away from brand-name companies.

• Investing in the biotech sector requires more due diligence than any other sector because of its unpredictable nature and the potential fallout of overly hyped products, remarks Marc Lichtenfeld with the Smart Profits Report. If you are looking into this sector, you may want to be sure that the potential for profits is worth the risks.

Challenge Grants are two years grants to National Institute of Health (NIH) designed to bring about collaborations between  small pharmaceutical and biotechnology companies and academia. This funding could bring about additional innovation in the industry and keep it growing.

Ruben Dagda for The Examiner reports that the biotechnology industry has proven as a safe and foolhardy industry even in these rough economic times. Both the health care and biotechnology industries have been among the least hard-hit in terms of job losses and contraction, although it’s far from recession-proof.

Early signs of funding within the industry are coming back and the biotech industry needs the funding because of the nature of the industry. Thomas Gryta for The Wall Street Journal reports the sector has a higher need for that cash than other industries because its drug-development model often requires years of losses before a product is approved. The tight credit markets have left the bioetch companies in a vulnerable position, and the stimulus package has the ability to preserve them.

• iShares NASDAQ Biotechnology (IBB): down 2.5% year-to-date; up 8.2% over three months

• SPDR S&P Biotech (XBI): down 11.2% year-to-date; up 5.5% over three months

• PowerShares Dynamic Biotech & Genome (PBE): down 3.4% year-to-date; up 6.3% over three months

• First Trust AMEX Biotechnology (FBT): down 0.30% year-to-date; up 6.5% over three months

For more stories about biotech, visit our biotechnology category.

• Health Care Reform and Biotech ETFs: Will There Be Opportunities?
• Why Biotech ETFs May Be the Better Choice
• Can Obama’s Push Reignite Biotech and Health Care ETFs?
• How Biotech ETFs Can Rise Above Challenges
• Comparing the ETFs of the Health Care Sector