Biotechnology equities are lagging the healthcare sector and the broader market this year, but with new variants of the coronavirus expected to continue popping up in 2022, it’s impossible to ignore biotech assets as a potential rebound idea.

That includes the VanEck Vectors Biotech ETF (BBH), which, to its credit, is trading higher this year. The $541.6 million BBH holds just 25 stocks, and while that’s a concentrated lineup relative to traditional healthcare exchange traded funds, the VanEck offering is nonetheless levered to vaccinations and other efforts to combat COVID-19.

The recent emergence of the Omicron variant proves as much. Though temporary, those headlines provided a boost for BBH late last month.

“While Omicron fears rattled the world’s financial markets, shares of major coronavirus vaccine makers rose as a result of the latest pandemic jitters. Moderna and BioNTec are currently working to adapt their COVID-19 vaccines to address the new variant. The first steps of developing a new vaccine overlap with the research that is necessary to evaluate whether the shot will be needed—a process that both BioNTec and Moderna began last week as news of the new variant began to spread around the world,” according to VanEck research.

Novavax (NASDAQ:NVAX) is another notable player on the coronavirus vaccine stage.

“Meanwhile, Novavax also mentioned that it had started working on a version of its COVID-19 vaccine to target Omicron and would have the vaccine ready for testing and manufacturing in the next few weeks,” adds VanEck.

In order, Moderna (NASDAQ:MRNA), BioNTec (NASDAQ:BNTX), and Novavax combine for over 15% of BBH’s weight, according to issuer data. Moderna is the fund’s second-largest holding.

With 2022 right around the corner, it’s worth noting that biotechnology stocks typically don’t lag in consecutive years. Additionally, a catalyst could be looming for BBH as the Food & Drug Administration (FDA) officially approves more coronavirus vaccines, removing the emergency use status in the process.

“Biotechnology stocks have the potential to provide investors with significant gains if a product, such as the vaccine, is deemed effective and safe. However, one of the key risks is the possibility that some products may never make it to market. One way to mitigate this risk is to focus on companies that are proven biotech leaders and have strong research and development capabilities—such as those considered large cap stocks,” concludes VanEck.

Other factors that could play out in BBH’s favor in the new year include ebbing regulatory headwinds and the possibility of increasing consolidation activity in the biotech space.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.