After slumping to end 2018, biotechnology stocks and the relevant exchange traded funds are surging to start 2019. The iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB), the largest biotech exchange traded fund by assets, gained more than 11.50% last week to extend its January gain to north of 12%.
Deal-making in the biotech space has heated up as more companies look to acquire others to expand on product lines. For example, Bristol-Myers Squibb said it would buy Celgene in a $74 billion deal. Eli Lilly also completed another deal related to cancer treatments in June when it closed a $1.6 billion deal to buy out Armo Biosciences.
“After brutal losses to end 2018, the biotech sector is off to the best start of the year since 2012,” reports CNBC. “Two new deals to the start the year and positive trial presentations at the J.P. Morgan Health Care Conference, have breathed new life into some of last year’s biggest stock losers.”
Healthcare ETFs, including biotech funds, could benefit from politicians’ plans to lower drug prices, something the White House took aim at last year. The administration has focused primarily on middlemen like pharmacy-benefit managers instead of manufacturers. The new policies have a more subtle affect on the overall industry as it may affect sales of certain blockbuster drugs but damage the share prices of smaller companies.
Given the low valuations, ongoing broad market support and diminished political risks, pharma stocks may continue to maintain their forward momentum. Other data points have been lifting biotechnology stocks as well.
“Positive trial data presented at the J.P. Morgan conference also drove big gains in the sector. Sage Therapeutics shares soared after the company reported positive late-stage data on its treatment for postpartum depression,” according to CNBC.