ETF Trends publisher Tom Lydon discussed the Virtus LifeSci Biotech Clinical Trials ETF (BBC) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.

Overview of Virtus LifeSci Biotech Clinical Trials ETF (BBC)

  • Exposure to a diversified portfolios of entrepreneurial biotechnology stocks
  • The healthcare sector has been among the best performing plays this year, and this biotech-related ETF has stood out over the past week
    • Healthcare/biotech enjoyed strong year of earnings
    • potential Trump administration actions on drug pricing drew greater investment interest
  • Despite healthcare segment’s outperformance this year, the sector continued to underperform the broader S&P 500 in the past four years
    • Investors who believe biotech may be expensive due to the recent run up may note that it does not look expensive relative to the broader market
    • BBC’s recently improving trends
      • only recently bounced off its resistance at the 200-day simple moving average on August 21
      • broke back above its short-term resistance at the 200-day simple moving average on August 27
  • Big pharma may continue to support small biotech companies
    • Big companies are willing to spend to acquire smaller products with attractive drug pipelines or to fund clinical trials
    • Recent tax reforms and repatriation tax reduction under Trump administration means large companies have larger cash reserves
  • Strong earnings
    • 95% of S&P 500 healthcare companies reported earnings above estimates
    • 83% of healthcare companies reported revenue above estimates
  • Virtus LifeSci Biotech Clinical Trials ETF
    • tracks the BioShares Biotechnology Clinical Trials Index
      • The index excludes large pharmaceuticals companies as well as medical devices and diagnostics; life science tools; specialty pharmaceuticals, generic drugs and outsourced drug delivery; healthcare services; contract research organizations; neutraceuticals; agricultural biotechnology; animal health; diversified healthcare; food sciences; information technology; and nanotechnology firms.
      • Companies with a lead drug candidate in a Phase 1, Phase 2 or Phase 3 trial can be included in that index.
        • Phase 1 – Purpose: Safety and dosage – Approximately 70% of drugs move to the next phase
        • Phase 3 – Purpose: Efficacy and side effects – Approximately 33% of drugs move to the next phase
        • Phase 3 – Purpose: Efficacy and monitoring of adverse reactions – Approximately 25-30% of drugs move to the next phase
        • First three of 4 phase process
    • Top holdings: Solid Biosciences 1.5%, Acceleron Pharma 1.5%, Regenxbio 1.4%, Versastem 1.3%, Arrowhead Pharma 1.2%
    • 46% small-cap growth, 28% small-cap blend, 17% small-cap value

For more podcast episodes featuring Tom Lydon, visit our podcasts category.

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