ETF Trends
ETF Trends

The biotechnology sector and its related exchange traded funds (ETFs) have seen a handsome rebound off the March 9 lows, but does the cash-strapped sector have what it takes to survive for the long haul?

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.

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.