The biotechnology sector is about to see some major shifts as patents expire and M&A activity gathers steam. Exchange traded funds (ETFs) are one of the best ways to get exposure to this dynamic and unpredictable sector.
Speculating on biotech mergers and acquisitions is about as solid a strategy as playing roulette, says John Jannarone for The Wall Street Journal. In other words, the house always wins. [5 Biotech ETFs for the Bullish.]
After a mixed start to the year, biotech ETFs might begin to see their fortunes change:
- Generic Boost. The FDA has approved Novartis’ generic version of the blood thinner Lovenox, says MediaPost. As pantented drugs expire, this could become a new source of revenue for the sector. Biologic medicine alone could become a $100 billion industry.
- M&A Activity. A takeover by Sanofi-Aventis SA of biotech company Genzyme Corp. is rumored to be in progress, according to Reuters. Sources familiar with the matter told Reuters on Friday that Sanofi-Aventis is searching for a large acquisition, lifting shares 15% on the news.
- New Research. Joe Patterson for The Lipman Capital Times reports that a lab made up of modern biochemists is looking at the possibility that algae can be used as a biofuel in the future. Biotechnology can figure out a way to create an algae that converts sunlight into lipids and oils as fast as possible, then they will have created a new source of diesel and jet blue that can be harnessed.
Harnessing these changes through ETFs can lower the risk that often comes with single company exposure, due to the hit-or-miss nature of the sector and the smaller company size common in the industry. [First Trust Biotech ETF Makes It to the Top.]
For more stories about biotech, visit our biotech category. Our ETF Analyzer shows that there are currently five biotech ETFs trading now, including these three:
- iShares Nasdaq Biotechnology ETF (NASDAQ: IBB)
- SPDR S&P Biotech ETF (NYSEArca: XBI)
- First Trust NYSE Arca Biotech ETF (NYSEArca: FBT)
Tisha Guerrero 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.