It’s been a lengthy of stretch of subpar performance by biotech stocks and related exchange traded funds. That’s a scenario that will repeat this year. However, there are inklings things are changing for the better.
Over the past month, the widely followed Nasdaq Biotechnology Index is higher by 2.22%. The WisdomTree BioRevolution Fund (WDNA) has been twice as strong over the same span. To be sure, those aren’t big percentages, but rebounds have to start somewhere. Beleaguered biotech investors are likely grateful for the gains. It appears the category’s major benchmarks are cruising toward a third consecutive losing year.
Biotech remains a catalyst-rich field, highlighting its risk/reward profile. One of those catalysts and one addressed by WDNA is CRISPR, or ”clustered regularly interspaced short palindromic repeats.” Regulators in the U.K. last month approved the first CRISPR treatment for patients. That could be the start of more global approvals. And that is likely to bring with it an assortment of positive investment implications.
CRISPR Could Propel Biotech ETF WDNA in 2024
The aforementioned U.K. approval is pertinent to Vertex Pharmaceuticals (VRTX) and CRISPR Therapeutics (CRSP), both of which are WDNA holdings. Another CRISPR catalyst could be in the offing as the Food & Drug Administration is expected to approve another sickle cell gene therapy from Bluebird Bio later this month, though that company isn’t a WDNA holding. The point is that the ETF has catalysts, some of the near-term variety.
“If we force ourselves to respect the journey of discovery and all the steps required to get to this point, these developments are extremely exciting. However, we are likely still a long way off from CRISPR therapies that can be used at scale. Patients will only be eligible if they have gone through other possible treatments without success,” noted Christopher Gannatti, global head of research at WisdomTree.
On a stand-alone basis, WDNA could be a compelling idea for investors looking to access a disruptive theme. CRISPR and DNA sequencing check that box.
Adding to the allure of the disruptive thesis is that CRISPR advances are likely to be facilitated in some part by elevated technology; namely, artificial intelligence. As currently structured, many biotech ETFs don’t provide adequate exposure to the AI/CRISPR intersection. WDNA does.
“Still, the promise for the convergence of technology can accelerate the learnings in biotech. AI and the growth of models to help researchers unlock new drug discoveries looks to be increasing future innovation potential,” concluded Gannatti.
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