In year that has seen biotechnology exchange traded funds dominate other sector ETFs, it might appear as though the time is right for some new competitors to come to market.
LifeSci Index Partners, LLC, a New York City-based investment advisor and index provider, is banking on demand for biotech ETFs, both new and old, with today’s launch of the BioShares Biotechnology Clinical Trials Fund (NasdaqGM: BBC) and the BioShares Biotechnology Products Fund (NasdaqGM: BBP).
BBC wil track the BioShares Biotechnology Clinical Trials Index, which is sponsored by LifeSci Index Partners, LLC.
The index excludes large pharmaceuticals companies as well as medical devices and diagnostics; life science tools; specialty pharmaceuticals, generic drugs and outsourced drug delivery; healthcare services; contract research organizations; neutraceuticals; agricultural biotechnology; animal health; diversified healthcare; food sciences; information technology; and nanotechnology firms. [Interesting Biotech ETFs on the Way]
Companies with a lead drug candidate in a Phase 1, Phase 2 or Phase 3 trial can be included in that index. The index had 104 constituents at the end of the second quarter.
“The landscape of the biotechnology sector has experienced dramatic shifts since the IPOs of Cetus and Genentech in the early 1980s,” said LifeSci Index Partners co-founder, Paul Yook in a statement. “Our BioShares funds are designed with the current biotechnology market in mind and offer investors unique and diversified portfolios of entrepreneurial biotechnology stocks by applying our rules-based index methodology.”
BBP will track the BioShares Biotechnology Products Index, which is also sponsored by LifeSci Index Partners. That index follows U.S.-listed biotech companies with a primary product offering or product candidate that has landed FDA approval, according to the SEC filing. At the end of the second quarter, the index was home to 43 companies.
“Biotechnology Product companies, such as those found in BBP, have developed at least one drug that has been approved by the Food and Drug Administration (FDA) and has gone into commercial production. These companies devote their energies toward sales and marketing, attempting to raise awareness of their new product launches,” according to the BioShares statement.
Both new ETFs are equally-weighted, which not only helps diminish single-stock risk, but also helps lever the funds to positive FDA and mergers and acquisitions that often proves impactful for smaller biotech companies that are underrepresented in several established biotech ETFs. [Cubist Acquisition Lifts Biotech ETFs]
ETF Trends editorial team contributed to this post.