Despite last week’s volatility, positive sentiment throughout the biotech industry continued to intensify, propelled by favorable legislation and encouraging trial data.
The ALPS Medical Breakthroughs ETF (SBIO) outpaced broader market indexes, as well as the competing SPDR S&P Biotech ETF (XBI) and iShares Biotechnology ETF (IBB), in a volatile last week for markets, according to a September 19 insight from ALPS.
“SBIO’s breakthrough small to mid-cap names continue to build on positive fundamentals, fueled by research and development growth and M&A activity despite depressed valuations year-to-date,” ALPS wrote. “Competing biotech funds differ from SBIO materially in market cap with allocations to large-cap biopharma companies, where SBIO’s SMID-cap breakthrough biotech holdings offer a higher level of trial data and M&A potential.”
Last week, SBIO notably outperformed XBI and IBB’s allocation of smaller biotech and defensive large-cap biotech names like Amgen and Moderna, despite the lower volatility these larger names should offer in a portfolio. Neither Amgen nor Moderna are holdings in SBIO.
Garnering significant attention last week, the Biden administration’s National Biotechnology and Biomanufacturing Initiative will provide more than $2 billion to strengthen U.S. biotech supply chains, increase domestic biomanufacturing, and bolster the U.S.’s promise of creating life-saving medicines and breakthrough treatments of diseases.
SBIO’s U.S.-based allocation of biotech companies that have one or more drugs in either Phase II or Phase III of the U.S. Food and Drug Administration clinical trials are likely beneficiaries of the Biotechnology Initiative, with the policy support spread across SBIO’s treatment segments (DREEN, Rare & Orphan Diseases, Cancer, Cardiology & Hematology) sparking additional M&A opportunity and strengthening the drug pipeline for names in SBIO, according to ALPS.
The Department of Energy (DOE) also plans to announce an additional ~$178 million to advance innovative research efforts for U.S. biotechnology, which is not included in the initiative total spending, and should act as a future catalyst for SBIO and the biotech industry, according to ALPS.
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