Historically, biotechnology stocks and exchange traded funds thrive when elections are completed. And while the winner of the presidential race isn’t crystal clear, the ALPS Medical Breakthroughs ETF (SBIO) notched a strong performance in the first trading day following Election Day.
SBIO’s underlying index, the Poliwogg Medical Breakthroughs Index is comprised of small- and mid-cap stocks of biotechnology companies that have one or more drugs in either Phase II or Phase III U.S. Food and Drug Administration (FDA) clinical trials.
As coronavirus cases start to tick upwards once more, the race to create a vaccine will only intensify, boding well for the biotechnology sector. ETF investors may want to keep an eye on biotech funds, which are already garnering interest as 2020 winds down.
This year, biotechnology ETFs like SBIO have been in the spotlight due in large part to the coronavirus with $2.75 billion flowing into those funds as of late October. SBIO is getting in on the action, taking in $28 million in new cash as of Oct. 21, bringing its year-to-date tally to $216 million.
SBIO’s Setup: On the Forefront of Medical Innovations
At a time when clinical trials are increasingly meaningful, SBIO meets investor interest on that front. The ETF’s holdings have one or more drugs in either Phase II or Phase III U.S. Food and Drug Administration clinical trials. In a Phase II trial, the drug is administered to a group of 100-300 people to see if it is effective and to evaluate its safety. In a Phase III trial, the drug is given to a larger group, between 500-3,000 people, to confirm its effectiveness, monitor side effects, compare it to commonly used treatments and collect information that will allow the drug or treatment to be used safely.
SBIO’s largest component, Mirati Therapeutics (NASDAQ:MRTX), recently rallied and it wasn’t because the company is working on a coronavirus vaccine.
Instead, Mirati announced preliminary data for its KRAS inhibitor, which showed positive anti-tumor results in patients with non-small cell lung cancer, colorectal cancer, and other solid tumors.
That confirms that SBIO, unlike some of its rivals, isn’t directly tethered to the fate of COVID-19 vaccine, but positioned for greater 2021 upside.
Other biotech ETFs include the VanEck Vectors Biotech ETF (BBH), iShares Nasdaq Biotechnology ETF (IBB), and the Virtus LifeSci Biotech Clinical Trials ETF (BBC).
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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.
