It’s been a complicated year for tech firms outside those “Magnificent Seven” names that have, to some degree, outgrown a simple “tech” distinction. High interest rates have taken a toll on tech firms. That includes biotech firms that rely on borrowing in early stages before they can have patents approved. Despite that, however, at least one biotech ETF is ending the year on a high – and a big one, at that.
Indeed, the ALPS Medical Breakthroughs ETF (SBIO) has returned 21.4% over the last month, per VettaFi data. That outperforms both its ETF Database Category and FactSet Segment averages. That activity has also seen SBIO’s price recover back to the $29.6 range it last hit in October from lows around $24. That price rise has not only taken the ETF’s price above its 50-day simple moving average (SMA), but above its 200-day SMA as well.
The main stock rising in SBIO’s holdings, per YCharts, is Acadia Pharmaceuticals (ACAD), which has risen significantly in recent weeks following a win in a patent lawsuit. ACAD has gained 32% since that win. Elsewhere in SBIO, China approved VYVGART, a treatment by Zai Labs Ltd (ZLAB), with ZLAB rising 14%.
Biotech ETF SBIO’s Approach
SBIO holds both as part of its approach. It tracks the S-Network Medical Breakthroughs Index for a 50 basis point fee. The biotech ETF’s index takes a market-cap-weighted approach specifically including firms with one or more drugs in Phase II or Phase III FDA clinical trials. To screen out some firms that may face balance sheet struggles amid this higher-for-longer rate regime, SBIO limits itself to firms with at least $200 million in AUM. It also screens for sustainability.
See more: “Play US Gene Treatment Approval in SBIO“
A new year brings new opportunities, and with the potential for rate cuts down the line, a biotech ETF could offer some notable appeal. For investors on the lookout for exposure to ongoing advances in the space, SBIO may offer one notable route in.
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vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for SBIO, for which it receives an index licensing fee. However, SBIO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SBIO.