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4 Biotech Funds That Should Be on Your Radar in 2021
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Biotech companies hit new highs throughout 2020 as vaccines development, treatments and biomedical devices required for COVID-19 pandemic boosted profits. Biotechnology has been a high risk sector since the very beginning. Prospects of a new drug or biomedical devices help shares shoot up easily, but failures in achieving desired outcomes push stocks in the red. Vaccine discovery helped biotech funds rally, and many high risk-tolerant investors believe that the sector will continue to grow in 2021 as well.
While the pandemic does have an impact on the biotech sector, healthcare innovations were needed even before the outbreak for treating and curing rare and chronic diseases. Several smaller-cap biotech firms or startups are engaged in innovative solutions, and every year larger-cap pharmaceutical companies, in order to keep expanding, often take them over. These mergers and acquisitions also boost the biotech sector and help in maintaining its growth pace.
Several small and large-scale biotech companies have been a prime fighter in the battle against cancer. This life threatening disease has been on the research and development list of many companies and even after the pandemic eases, potential of patient groups, and need for their treatments worldwide are reasons to be optimistic for biotech’s growth in 2021.
Pharma giant Merck is among the large cap companies investing in small-scale oncology firms like Seagen. Merck made a $1 billion equity investment in Seagen last year as part of a collaboration deal. The companies will co-develop and commercialize ladiratuzumab vedotin, which is an investigational therapy that Seagen has been studying for breast cancer and other solid tumors. Over the past year the FDA has approved two of Seagen's drugs —Padcev used to treat the most common form of bladder cancer and Tukysa for metastatic HER2-positive breast cancer. Merck-Seagen is one example of collaborations between small and large-scale biotech companies.
IPOs Boosting the Space
Recent IPOs also show that the sector is booming, and new filings continues to flood the IPO pipeline for 2021. On Jan 8, Cullinan Management, an oncology biotech, began trading under the ticker CGEM. The day before the IPO, Cullinan upsized and priced above the upwardly revised range to raise $250 million at a $953 million market cap. Cullinan closed 42.4% higher on its first trading day. The company’s lead candidate is currently in its Phase 1/2a trials.
Another clinical stage biopharmaceutical company, Gracell Biotechnologies, also began trading on Jan 8 on The Nasdaq Global Market and raised $209 million at a $1.3 billion market cap, finishing 32% higher. The company is developing CAR-T cell therapies for hematologic malignancies on its FasTCAR and TruUCAR platforms.
4 Top Biotech Funds to Buy
The SPDR S&P Biotech ETF gained nearly 48% in 2020 compared to the S&P 500’s rise of 16%, the ETF marked its best performance since 2013. Since prospects of the biotech sector are bright in 2021, we have shortlisted four biotech mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to grow. Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform their peers in the future.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
T. Rowe Price Health Sciences Fund (PRHSX - Free Report) aims for long-term capital appreciation. This non-diversified fund invests majority of its net assets in common stocks of companies mostly engaged in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences.
This Zacks sector – Health product –has a history of positive total returns for more than 10 years. Specifically, PRHSX returned 17.4% and 13.7% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PRHSX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.76%, which is below the category average of 1.21%.
Fidelity Select BiotechnologyPortfolio (FBIOX - Free Report) fund aims for capital appreciation. The fund invests majority of its net assets in common stocks of companies mostly engaged in the research, development and distribution of biotechnological products. This non-diversified fund invests in both U.S. and non-U.S. companies.
This Zacks sector – Health product –has a history of positive total returns for more than 10 years. Specifically, FBIOX returned 17.4% and 9.1% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FBIOX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.72%, which is below the category average of 1.21%.
Janus Henderson Global Life Sciences Fund Class A (JFNAX - Free Report) aims forlong-term growth of capital. The fund invests majority of its assets in securities of companies that its portfolio managers believe have a life science orientation. The product has a fundamental policy of investing at least a quarter of its assets in securities of companies that are categorized in the life sciences sector.
This Zacks sector – Health product –has a history of positive total returns for more than 10 years. Specifically, JFNAXreturned 17.3% and 11.5% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JFNAX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 1.00%, which is below the category average of 1.26%.
Franklin Biotechnology Discovery Fund Class A (FBDIX - Free Report) aims for capital growth. The fund invests majority of its assets in the securities of biotechnology companies and discovery research firms. This non-diversified fund may also invest about a fifth of its assets in equity or debt securities of any type of issuer.
This Zacks sector – Health product –has a history of positive total returns for more than 10 years. Specifically, FBDIX returned 13.8% and 6.9% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FBDIXcarries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 1.03%, which is below the category average of 1.26%.
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4 Biotech Funds That Should Be on Your Radar in 2021
Biotech companies hit new highs throughout 2020 as vaccines development, treatments and biomedical devices required for COVID-19 pandemic boosted profits. Biotechnology has been a high risk sector since the very beginning. Prospects of a new drug or biomedical devices help shares shoot up easily, but failures in achieving desired outcomes push stocks in the red. Vaccine discovery helped biotech funds rally, and many high risk-tolerant investors believe that the sector will continue to grow in 2021 as well.
While the pandemic does have an impact on the biotech sector, healthcare innovations were needed even before the outbreak for treating and curing rare and chronic diseases. Several smaller-cap biotech firms or startups are engaged in innovative solutions, and every year larger-cap pharmaceutical companies, in order to keep expanding, often take them over. These mergers and acquisitions also boost the biotech sector and help in maintaining its growth pace.
Several small and large-scale biotech companies have been a prime fighter in the battle against cancer. This life threatening disease has been on the research and development list of many companies and even after the pandemic eases, potential of patient groups, and need for their treatments worldwide are reasons to be optimistic for biotech’s growth in 2021.
Pharma giant Merck is among the large cap companies investing in small-scale oncology firms like Seagen. Merck made a $1 billion equity investment in Seagen last year as part of a collaboration deal. The companies will co-develop and commercialize ladiratuzumab vedotin, which is an investigational therapy that Seagen has been studying for breast cancer and other solid tumors. Over the past year the FDA has approved two of Seagen's drugs —Padcev used to treat the most common form of bladder cancer and Tukysa for metastatic HER2-positive breast cancer. Merck-Seagen is one example of collaborations between small and large-scale biotech companies.
IPOs Boosting the Space
Recent IPOs also show that the sector is booming, and new filings continues to flood the IPO pipeline for 2021. On Jan 8, Cullinan Management, an oncology biotech, began trading under the ticker CGEM. The day before the IPO, Cullinan upsized and priced above the upwardly revised range to raise $250 million at a $953 million market cap. Cullinan closed 42.4% higher on its first trading day. The company’s lead candidate is currently in its Phase 1/2a trials.
Another clinical stage biopharmaceutical company, Gracell Biotechnologies, also began trading on Jan 8 on The Nasdaq Global Market and raised $209 million at a $1.3 billion market cap, finishing 32% higher. The company is developing CAR-T cell therapies for hematologic malignancies on its FasTCAR and TruUCAR platforms.
4 Top Biotech Funds to Buy
The SPDR S&P Biotech ETF gained nearly 48% in 2020 compared to the S&P 500’s rise of 16%, the ETF marked its best performance since 2013. Since prospects of the biotech sector are bright in 2021, we have shortlisted four biotech mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to grow. Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform their peers in the future.
The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
T. Rowe Price Health Sciences Fund (PRHSX - Free Report) aims for long-term capital appreciation. This non-diversified fund invests majority of its net assets in common stocks of companies mostly engaged in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences.
This Zacks sector – Health product –has a history of positive total returns for more than 10 years. Specifically, PRHSX returned 17.4% and 13.7% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
PRHSX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.76%, which is below the category average of 1.21%.
Fidelity Select Biotechnology Portfolio (FBIOX - Free Report) fund aims for capital appreciation. The fund invests majority of its net assets in common stocks of companies mostly engaged in the research, development and distribution of biotechnological products. This non-diversified fund invests in both U.S. and non-U.S. companies.
This Zacks sector – Health product –has a history of positive total returns for more than 10 years. Specifically, FBIOX returned 17.4% and 9.1% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FBIOX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.72%, which is below the category average of 1.21%.
Janus Henderson Global Life Sciences Fund Class A (JFNAX - Free Report) aims forlong-term growth of capital. The fund invests majority of its assets in securities of companies that its portfolio managers believe have a life science orientation. The product has a fundamental policy of investing at least a quarter of its assets in securities of companies that are categorized in the life sciences sector.
This Zacks sector – Health product –has a history of positive total returns for more than 10 years. Specifically, JFNAXreturned 17.3% and 11.5% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
JFNAX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 1.00%, which is below the category average of 1.26%.
Franklin Biotechnology Discovery Fund Class A (FBDIX - Free Report) aims for capital growth. The fund invests majority of its assets in the securities of biotechnology companies and discovery research firms. This non-diversified fund may also invest about a fifth of its assets in equity or debt securities of any type of issuer.
This Zacks sector – Health product –has a history of positive total returns for more than 10 years. Specifically, FBDIX returned 13.8% and 6.9% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FBDIXcarries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 1.03%, which is below the category average of 1.26%.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>