BBH: Biogen Surges on Alzheimer Drug ApprovalSamir Barjon, ETF Product AnalystJune 29, 2021
U.S regulators have approved Biogen’s newest drug as the first treatment to likely treat a cause of Alzheimer’s disease. This is the first approval of an Alzheimer’s treatment in nearly two decades. Biogen said it has priced the drug, to be sold as Aduhelm, at $56,000 per year. Following this announcement, Biogen shares rose almost +50% and closed at their highest level in over six years. This recent FDA approval suggests a more constructive regulatory environment for new and upcoming drug approvals, which may provide a better environment for biotech stocks and stock returns. The Biotech industry is tackling problems and providing revolutionary solutions for a range of health issues. These companies were crucial to the development of Covid-19 vaccines and treatments, further evidence that this industry is providing real world solutions to global health issues.
Biotech Index performance has been uneven year to date, depending on the specific strategy. VanEck Vectors® Biotech ETF (NASDAQ: BBH), which seeks to track the MVIS US Listed BioTech 25 Index, has outperformed its largest competitors year-to-date. Different index methodologies may lead to different holdings, characteristics, and performance, even when choosing from companies in the same industry. During the period highlighted in the chart below, the MVIS US Listed BioTech 25 Index had a higher exposure to a handful of stocks including Biogen, Moderna and BioNTech, which were under-represented in the competitors’ indexes and led to the index outperformance. The MVIS US Listed BioTech 25 Index is focused on large cap names, while the other indexes are tilted towards small- and mid-cap biotech stocks.
Not all Biotech Strategies are Created Equally
Source: Morningstar Direct. 12/31/2020 - 6/21/2021. Past performance is not indicative of future results.
While Biotech stocks can exhibit heightened volatility, investors can look to an exchange traded fund, such as VanEck Vectors® Biotech ETF (NASDAQ: BBH) to help mitigate risk while providing exposure to a basket of highly liquid Biotech companies. BBH focuses on some of the most liquid pure play companies in the industry based on market cap and trading volume. For investors looking to participate in the Biotech revolution, BBH provides diversified exposure to the industry without forcing investors to try pick individual winners.
An investment in the Fund may be subject to risks which include, among others, investing in the biotechnology industry, equity securities, health care sector, depositary receipts, medium capitalization companies, issuer-specific changes, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and concentration risks, all of which may adversely affect the Fund. Medium capitalization companies may be subject to elevated risks.
MVIS US Listed Biotech 25 Index is the exclusive property of MV Index Solutions GmbH (a wholly owned subsidiary of Van Eck Securities Corporation), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MV Index Solutions GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Vectors Biotech ETF is not sponsored, endorsed, sold or promoted by MV Index Solutions GmbH and MV Index Solutions GmbH makes no representation regarding the advisability of investing in the Fund.
The NASDAQ Biotechnology Index contains securities of NASDAQ-listed companies classified according to the Industry Classification Benchmark as either Biotechnology or Pharmaceuticals which also meet other eligibility criteria.
S&P Biotechnology Select Industry Index comprises stocks in the S&P Total Market Index that are classified in the GICS biotechnology sub-industry.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.
Authored bySamir Barjon
ETF Product Analyst