Why This Biotech ETF Keeps Surging

Ten biotechnology exchange traded funds hit all-time highs Wednesday, an impressive number when considering that represents about two-thirds of the biotech ETF universe. One of those 10 is also one of the group’s newest members, the BioShares Biotechnology Products Fund (NasdaqGM: BBP).

Though off its highs of the day, BBP is still up 0.6%, extending its gain since coming to market in December to north of 41%. Only two sector ETFs, not surprisingly both are biotech funds, have outperformed BBP this year.

BBP has gained a tidy 7.1% over the past week thanks to catalysts pertaining to some of its marquee holdings. Anacor Pharamcueticals (NasdaqGS: ANAC) saw its stock up 50% following Monday’s release of positive data for its skin ointment drug that has potential to be its second to market. Anacor is BBP’s largest holding at a weight of 4.3%, according to issuer data.

Today, shares of biotech giant Celgene (NasdaqGS: CELG) are up nearly 8% after the company agreed to acquire Receptos (NasdaqGS: RCPT). Celgene is BBP’s 14th-largst holding. 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]

“Anacor already has an approved product on the market (Kerydin for nail fungus), but reported positive Phase 3 data for its second drug Crisaborole for eczema.  So investors and analysts are now modeling in the revenue from this second drug with greater clarity and certainty, and the stock is up approximately 60% in 3 days since the announcement,” said BioShares Portfolio Manager Paul Yook in an email exchange with ETF Trends.

Last month, BioShares expanded BBP’s lineup to 39 from 33 as part of the ETF’s semi-annual rebalancing and recomposition. The BioShares Biotechnology Products Index, the benchmark for BBP, is tilted more toward large-caps, but close to a third of BBP’s selection universe has cancer therapy exposure, giving the ETF ample leverage to one of the hottest biotech themes. [New Biotech ETF Could Challenge Old Rivals]