Biotechnology sector-related exchange traded funds led the charge on Monday, with some breaking out to new highs.
Among the best performing non-leveraged ETFs of Monday, the ARK Genomic Revolution ETF (CBOE: ARKG) jumped 6.1% and Virtus LifeSci Biotech Clinical Trials ETF (BBC) surged 6.4%. Meanwhile, the more broadly watched SPDR S&P Biotech ETF (NYSEArca: XBI) increased by 4.6%.
The biotech segment has also been on a tear over the past month, with ARKG up 32.8%, BBC up 26.6%, and XBI up 21.6%. In comparison, the S&P 500 rose 6.7% over the past month.
Biotechnology stocks have been rallying on optimism that drug makers will come out with a way to fight off the coronavirus.
The ARK Genomic Revolution ETF helps investors tap into the evolution in genomics, one of the most disruptive technologies out there. As the world puts a greater emphasis on research and development into combating virulent diseases in the wake of the coronavirus outbreak, the targeted sector plays as ARKG could fall into the limelight. The fund includes companies that merge healthcare with technology and capitalize on the revolution in genomic sequencing. These companies try to better understand how biological information is collected, processed and applied by reducing guesswork and enhancing precision; restructuring health care, agriculture, pharmaceuticals, and enhancing our quality of life.
Specifically, companies within ARKG are expected to benefit from extending and enhancing the quality of human and other life by capitalizing on technological and scientific developments and advancements in genomics. The companies held in ARKG may be engaged with technologies related to CRISPR, Targeted Therapeutics, Bioinformatics, Molecular Diagnostics, Stem Cells, and Agricultural Biology.
The Virtus LifeSci Biotech Clinical Trials ETF tracks the BioShares Biotechnology Clinical Trials Index. Clinical Trials stage companies are typically younger, smaller companies which do not have a drug approved, but instead focus on testing their experimental drugs. Companies with a lead drug candidate in Phase 1, Phase 2, or Phase 3 trial can be included in that index. Phase 1 is related to safety and dosage control, where around 70% are generally able to make it through. Phase 2 focuses on side effects and what adverse effects there may be. About a third of those move through to stages beyond, which take into consideration other factors.
Lastly, the SPDR S&P Biotech ETF, one of the largest biotechnology ETFs by assets, uses an equal-weight methodology, which means it tilts toward smaller companies, but not at the expense of exposure to some of the industry’s larger players. In both cases, the fund offers above-average exposure to potential COVID-19 treatments and vaccines.
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