Generally speaking, the biotechnology exchange traded funds trade has been relatively easy. Save for bumps in the road here and there, investors could have purchased any of the traditional plain vanilla biotech ETFs over the past year and made money.
That does not diminish the need for studying an ETF’s underlying components, which after all are responsible for driving the fund’s performance. A pair of new, upstart biotech ETFs have made some constituent changes that investors should note.
The BioShares Biotechnology Products Fund (NasdaqGM: BBP), which debuted in December, is expanding its lineup to 39 from 33 as part of the ETF’s semi-annual rebalancing and recomposition.
BBP tracks 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. [New Breed Biotech ETFs]
“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 BioShares.
BBP has surged 26.4% since coming to market. The ETF allocates more than 5% of its weight to three stocks – Halozyme Therapeutics (NasdaqGS: HALO), Exelixis (NasdaqGS: EXEL) and Anacor Pharmaceuticals (NasdaqGS: ANAC). BBP’s top 10 holdings combine for over 43% of the ETF’s weight. Investors have allocated $20.2 million to the ETF.
BBP’s stablemate, the BioShares Biotechnology Clinical Trials Fund (NasdaqGM: BBC),which also debuted in December, expands its lineup to 90 from 67 stocks. That move reduces the fund’s weighted average market cap to $1.5 billion from $2.1 million.
“Seven stocks have moved from the BBC fund upon transitioning to the Products stage, and one stock has moved to the BBC fund upon transitioning back to the Clinical Trials stage,” according to a statement.
BBC’s underlying 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]
The largest holding in BBC, Retrophin (NasdaqGS: RTRX), commands a weight of almost 3.2%. The ETF’s top 10 holdings combine for roughly a quarter of the fund’s weight. BBC has hauled in $37.5 million in assets on its way to a 27.2% gain.
BioShares Biotechnology Clinical Trials Fund