Following some notable uncertainty in recent years, M&A activity looks to be in recovery. In the first half of this year, biotech M&A activity saw some positive numbers, per a new J.P. Morgan report. That report cited a projection of some 100 M&A moves this year, among other improving data points for the space. Together, that uptick in M&A activity for biopharma and tech firms could benefit the biotech ETF SBIO.
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SBIO, the ALPS Medical Breakthroughs ETF, tracks a market-cap weighted index of U.S. biotech firms. The firms in that S-Network Medical Breakthroughs Index must have one or more drugs in either Phase II or Phase III FDA clinical trials. The biotech ETF also limits itself to firms with market caps between $200 million and $5 billion.
An increasing rate of M&A activity could benefit a number of those firms in the ETF’s portfolio. Many smaller biotech companies present themselves as targets for acquisition as a means to benefit shareholders. What’s more, potential rate cuts this Fall could energize M&A activity even more. M&A activity has already seen a broad recovery, not only in biopharma and biotech but in other sectors, too.
The J.P. Morgan report found a total of $17.9 billion worth of transactions in biopharma in Q2 this year. It further points to “more value” for Phase III programs in the later stages, near to approval – squarely in the view of SBIO.
The biotech ETF has returned 6.56% over the last one year period per SS&C ALPS Advisors data. Charging 50 basis points (bps), the fund is also on track to celebrate its 10th anniversary of operation in December. For those investors looking for a thematic option to ride some positive economic trends outside of mainline tech, SBIO could appeal.
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VettaFi LLC (“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.
