Biotechnology exchange traded funds are still scuffling on a year-to-date basis, but some members of that group have recently been showing signs of life, including the BioShares Biotechnology Products Fund (NasdaqGM: BBP). BBP is up more than 2% over the past month.
For years, there were only five biotechnology ETFs on the market and though some members of that group are not traditional cap-weighted funds, most can be viewed as diversified funds. However, as biotechnology investing has gained steam, some ETF issuers are offering more focused, refined products such as BBP.
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.
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“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.
[related_stories]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.
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“BBP, which debuted in late 2014, carves out a specific niche within the biotech space by focusing only on biotech stocks with a primary product already on the market or one that has already garnered approval from the Food & Drug Administration,” according to InvestorPlace.
Biotechnology ETFs should also prove immune to hawkish changes in Fed policy. A recent study by Deutsche Bank indicates major biotech indexes have negative correlations to changes in 20-year U.S. government bonds. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
The improved outlook for the health care industry comes as many expect continued growth in the sector, despite an ongoing so-called earnings recession in the S&P 500. While FactSet anticipates the broad S&P 500 to show an earnings decline of -9.1% for Q1 2016, the health care sector is expected to report revenue growth of 8.9%.
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BioShares Biotechnology Products Fund
