Yesterday we spoke about the U.S. Biotech Equity sector generally, specifically in terms of impressive net inflows in 2015 as well as in the short term in IBB (iShares NASDAQ Biotechnology, Expense Ratio 0.48%) and other names in the category.
This brings us today to examine an ETF that debuted on the very last trading day of the year in 2014 and has made a quick name for itself in the Biotech sector, SBIO (ALPS Medical Breakthroughs ETF, Expense Ratio 0.50%).
This fund has raised more than $200 million in a relatively short amount of time and has an interesting title that likely attracts attention from potential investors whom may want to investigate the fund further to see exactly what it specializes in.
According to fund literature the ETF “invests in stocks of mid cap and small cap companies with a market capitalization of no less than $200 million and no more than $5 billion. It seeks to replicate the performance of the Poliwogg Medical Breakthroughs Index, by investing in the stocks of companies as per their weightings in the index.”
Furthermore, this index is defined as being composed of stocks that “have one or more drugs in either Phase II or Phase III U.S. FDA clinical trials.” It further defines both Phase II and Phase III trials, stating the following: “In a Phase II trial, the drug is administered to a group of 100-300 people to see if it is effective and to evaluate its safety. In a Phase III trial, the drug is given to a larger group, between 500-3,000 people, to confirm its effectiveness, monitor side effects, compare it to commonly used treatments and collect information that will allow the drug or treatment to be used safely.”
Clearly, investing in individual Biotech names involved in FDA Phase II or Phase III trials is not a new concept for portfolio managers and even retail investors, but it can often be somewhat of a crapshoot and expose the investor to a high degree of specific individual security risk given the historical volatility exhibited by such names and the potential for failure during the aforementioned trials. At the moment we see the following names weighted the heaviest in the index, with none of these stocks being household names: 1) GEVA (6.83%), 2) BLUE (5.48%), 3) SGEN (4.62%), 4) RCPT (4.42%), and 5) AKRX (4.28%).
ALPS Medical Breakthroughs ETF
For more information on Street One ETF market commentary and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com
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