How Biotech ETFs Are Overcoming Sector's Trials | ETF Trends

The biotechnology sector is a place of risky ventures that at times produce lucrative innovations, but the sector and related exchange traded funds (ETFs) need a helping hand in difficult times.

Small biotech companies are courting potential buyers, but not many are large enough to procure the necessary cash to buy them out, reports Kim Hart for The Washington Post. It is estimated that at least 100 small biotech firms are creeping into the red with only enough money to operate for a year.

It is often difficult to justify a large buyout to board members in a rough economy, but some large companies are taking advantage of the downturn to pick out start-ups with potential.

Health care costs are also expected to rise in 2009. This does not sound too pleasing to the consumers but it will help sustain the biotech market for new drugs and medical devices.

Harvard Professor John Holdren, an expert on global climate change, was approved by The Senate as President Barack Obama’s top adviser on science and technology policies, according to MSNBC. He will help implement Obama’s health care reforms and the possible lifting of restrictions on stem cell research.

Holdren is elated that the recent economic stimulus package supported biotech, nanotech, information tech, renewable energy and development of more efficient vehicles and buildings. Renewed interest in the biotech sector has pushed up its related ETFs in recent weeks:

  • iShares Nasdaq Biotechnology (IBB): down 10.2% year-to-date; up 13.5% for the last two weeks; above its 50-day moving average


  • HOLDRS Biotech (BBH): up 1.4% year-to-date; up 5.4% in the last two weeks; above both the 50-day and 200-day moving averages


Max Chen contributed to this article.

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.