The ARK Genomic Revolution Multi-Sector Fund (CBOE: ARKG) is already one of the best-performing healthcare ETFs over the past several years, but with a slew of secular tailwinds behind the genomics industry, ARKG’s best days could be ahead.
Genomics companies try to better understand how biological information is collected, processed, and applied by reducing guesswork and enhancing precision; restructuring health care, agriculture, pharmaceuticals, and enhancing our quality of life.
“Over the last five years, we have passed key inflection points in the ability to access, manipulate, and understand the molecular building blocks of the human body,” writes ARK Director of Research Brett Winton in a recent paper. “The ‘genomic age’ of medicine promises profound ramifications for human health and for the companies involved, among them: (i) tool providers that enable basic research, sharpen the precision of diagnostics, and guide personalized medicine; (ii) diagnostic platforms deploying data that informs the treatment of disease; (iii) and other companies deploying technology and data to create next-generation treatments and cures, increasing returns on therapeutic research and development for the first time in 20 years.
ARKG Continues to Be Promising
Genomics companies spend a plethora of time and massive amounts of money to fund breakthrough biological treatments and diagnostic tools. Blossoming developments can literally change their fortunes, and the fortunes of shareholders overnight. Genomics is likely to be an integral part of the biotechnology growth story in the years ahead.
“ARK Invest estimates that by 2024 therapeutic pipelines and tool providers should generate hundreds of billions of dollars in the new revenue and trillions in new market capitalizations as they transition to the genomic age,” notes Winton.
With scientists racing to find a vaccine for the coronavirus, health care, and biotechnology have been hot sectors this year. Yet, as investors try and pick a winner from the rapidly increasing group of companies that are entering the competition, a collection of biotechnology and other, more targeted exchange-traded funds that contain some of the key names in the vaccine race are delivering impressive returns.
Genomic funds are some of the shining stars in the collection of stellar health care ETF performers. At the start of the year, the genomics industry was already on a rapid trajectory with lower gene sequencing costs aiding the long-term benefits for related investments.
“If genetically targeted therapies prove more successful than their historical analogs then the economics of drug development will transform dramatically,” according to Winton. “Just a 10% reduction in the failure rate at each stage of the drug development process, for example, would double the return on drug research and development,24and if connected devices combined with machine learning are able to move a drug 25% more quickly through the clinical trial process than otherwise would have been the case, returns could triple.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.