HealthShares

Today, the company’s Board of Directors announced they are liquidating the company’s four underlying investment portfolios as of Dec. 31, 2008. Current market conditions, low market interest, and not so hot growth prospects in the near future gave the ETFs a less than healthy prognosis, and ultimately led to the decision to liquidate.

Back in August, revitalization efforts were made by HealthShares, as they streamlined their 15-fund family down to four. This attempt was not enough to save the inevitable “goodbye” to the NYSE Arca:

• HealthShares Cancer (HHK)
• HealthShares European Drugs (HRJ)
• HealthShares Diagnostics (HHD)
• HealthShares Enabling Technologies (HHV)

Eric Rosenbaum for Index Uiverse also reminds us that HealthShares also recently closed their  family of real estate funds, Adelante Shares.

These ETF closings are not the end, however, as XShares is ready to come back into the market in 2009 with new ETF products related to the evironment and infrastructure.

Dec. 23 will be the last day of trading for the HealthShares, and the last day on which creation unit aggregations of the Shares may be purchased or redeemed.

In a New York Times article, Elisabeth Rosenthal examines how over the past two years, cervical cancer has gone from an obscure disease mostly in poor nations to a great concern in many western countries.

Two vaccines have been approved and released over the past two years. Over this period, tens of millions of girls throughout the United States and Europe have been vaccinated against cervical cancer. In many countries, the vaccines were recommended for universal use among females between the ages of 11 and 26. The vaccines include Gardasil, from Merck, and Cervarix, a GlaxoSmithKline product.

As this market grows at an alarming rate, the vaccines have appealed to not only potential recipients and humanitarians, but politicians as well. The remarkably quick transition of the vaccines in the United States and Europe shows the success of what manufacturers call education and critics call marketing.

As investment in these vaccines increases, award-winning advertising has been utilized to promote these innovations. The impact has been so large, 41 states have passed or have begun considering legislation on cervical cancer. Virginia has made the shots mandatory for girls before entering school, which takes effect in 2009.

As even the critics of the marketing admit to the benefits of the vaccines, many questions remain unanswered about both treatments. Questions pertaining to the length of immunity and potential side effects have nagged the vaccines.

However, 16 million doses have already been distributed domestically by Merck. This left both the FDA and CDC saying that “by chance alone some serious adverse effects and deaths” will occur because of the large population these 16 million doses were administered to.

Even though some questions remain pertaining to the long-term effects and immunity of the vaccines, the market for these treatments is vast and potentially very lucrative. Some ETFs that could weigh in on this action include:

• HealthShares Cancer (HHK), is up 1.5% year-to-date with top holdings in Vertex Pharmaceuticals, APP Pharmaceuticals, Fresenius, and Onyx Pharmaceuticals.
• Pharmaceutical HOLDRs (PPH), is down 10.6% year-to-date with top holdings in Abbot Laboratories, Johnson & Johnson, Merck, and Pfizer.
• PowerShares Dynamic Pharmaceuticals (PJP), is down .8% year-to-date with top holdings in Genetech, Wyeth, Merck, and Johnson & Johnson.
• SPDR S&P Pharmaceuticals (XPH), is down .5% year-to-date with top holdings in Barr Pharmaceuticals, Forest Laboratories, King Pharmaceuticals, and Merck.
• iShares Dow Jones US Pharmaceuticals (IHE), is down 3.4% year-to-date with top holdings in Pfizer, Merck, Johnson & Johnson, and Abbot Laboratories.

Fifteen of XShares‘ line of HealthShares ETFs will close down, and their last trading day will be Sept. 19.

XShares President Jeff Feldman tells us it’s a simple matter of marketplace demand. “We were not generating assets in several of them, and they’re expensive to keep open.”

Closing the funds doesn’t mean that XShares didn’t believe in the products, but an acknowledgement that perhaps timing is everything. “We still believe our structure was right,” Feldman says, “and our timing was bad. So we decided to shutter some of them.”

When an ETF announces a closing, it follows an orderly process and investors are given plenty of notice before it actually takes place. Thirty-seven ETFs have closed this year, and we know that closing announcements tend to bring out the worriers: is the ETF industry in trouble? Are they a passing fad? But every industry has its successes and failures, and not every product to land in the marketplace can be a hit.

The entire line won’t close: four funds the marketplace seems to like will remain open. Meanwhile, Feldman says, they’ll revisit the old funds from time to time to see if they deserve another shot in the future.

The remaining funds will be:

• HealthShares Cancer (HHK)
  
• HealthShares European Drugs (HRJ)
  
• HealthShares Diagnostics (HHD)
• HealthShares Enabling Technologies (HHV)

HealthShares Enabling Technologies, however, is going to be renamed the Drug Discovery Tools Fund, and keep the same ticker symbol. A new fund will be joining the fold, as well: the HealthShares Asian Health, but it hasn’t begun trading.

Lower expense ratios for the remaining funds will be put in place, effective Oct. 1: for the cancer, diagnostic and drug discovery ETFs, the new expenses will be 0.60%, down from 0.75%. The European drugs will be 0.72%, down from 0.95%. The Asian health fund will be 0.95%. The four remaining funds will also get revamped benchmarks and number of constituents they’ll track, according to Murray Coleman for Index Universe.

The funds closing are:

• HealthShares Autoimmune-Inflammation (HHA)
• HealthShares Cardio Devices (HHE)
• HealthShares Cardiology (HRD)
• HealthShares Composite (HHQ)
• HealthShares Dermatology & Wound Care (HRW)
• HealthShares Emerging Cancer (HHJ)
• HealthShares European Medical Products & Devices (HHT)
• HealthShares GI/Gender Health (HHU)
• HealthShares Infectious Disease (HHG)
• HealthShares Metabolic-Endocrine Disorders (HHM)
• HealthShares Neuroscience (HHN)
• HealthShares Opthalmology (HHZ)
• HealthShares Orthopedic Repair (HHP)
• HealthShares Patient Care Services (HHB)
• HealthShares Respiratory/Pulmonary (HHR)