Post-Vaccine Distribution, Mergers Will Dominate Biotech Industry ETFs

The COVID-19 pandemic put biotech in the spotlight as companies around the globe worked feverishly to create a vaccine. Once a tried-and-true vaccine is developed and subsequently incorporated as standard fare in medical practice, one driver of biotech will be mergers and acquisitions, which should feed into the Direxion Daily S&P Biotech Bear 3X Shares (LABD).

LABD seeks daily investment results, before fees and expenses, of 300% of the inverse of the daily performance of the S&P Biotechnology Select Industry Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse (opposite) or short leveraged exposure to the index equal to at least 80% of the fund’s net assets (plus borrowing for investment purposes).

The index is designed to measure the performance of the biotechnology sub-industry based on the Global Industry Classification Standards (“GICS”). LABU has given traders plenty to cheer about this year with a 30% return according to Morningstar performance numbers:

LABU Chart

Like all of Direxion Investments’ leveraged funds, LABU gives traders the ability to:

  • Magnify short-term perspective with daily 3X leverage;
  • Go where there’s opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile with liquidity to trade through rapidly changing markets

Biotech Mergers Coming Into Play for 2021

Mergers and acquisitions took a dive when the pandemic was at its peak, but big deals are starting to pick up again. The biotech industry is definitely one of them with the biggest players like Merck making moves to shore up their business models in 2021.

As a United Press International article noted, “Pharmaceutical company Merck said Monday it will acquire a small, privately-held biotech firm that has developed a promising drug candidate for treating severe cases of COVID-19. Merck will acquire OncoImmune and its therapeutic coronavirus candidate CD24Fc for $425 million, according to Merck President Roger Perlmutter.”

“Recent clinical investigations support the view that CD24Fc may provide benefit beyond standard of care therapy for COVID-19 patients requiring oxygen support, and hence will represent an important addition to the Merck pipeline of investigational medicines and vaccines designed to address the COVID-19 pandemic,” Perlmutter said in a statement Monday.

“Meaningful new therapeutic options are desperately needed for possibly millions of people around the world who will develop severe or critical COVID-19 disease.”

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