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Why Biotech ETFs Surged in Monday's Trading Session

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The NASDAQ Biotechnology Index  gained 2.6% in the trading session on Nov 25. This compares favorably with the NASDAQ Composite Index’s rise of 1.3%, S&P 500 Index’s 0.8% and Dow Jones Industrial Average’s 0.7% on the same day. Increasing M&A deals, growing AI dominance and favorable regulatory tidings continue to drive the biotech market. The sector has also been benefitting from a flurry of positive news, including trial results and deal activities. Let’s see what could have possible triggered the upside (read: Biotech ETFs in Focus on Impressive Q3 Earnings Results).

FDA Approval

The FDA approved Global Blood Therapeutics, Inc.’s drug for treating sickle cell disease in adults and children aged 12 years or above on Nov 25. The shares of the company rose around 7% on the day. The drug will be marketed under the brand name of Oxbryta. With this development, the biotechnology sector has witnessed the approval of the second drug for treating sickle cell anaemia in recent days. Moreover, it has become the first drug to treat the primary cause of the disease instead of the symptoms. On Nov 15, Novartis AG (NVS - Free Report) received FDA approval for Adakveo to bring down the frequency of vaso-occlusive crises or pain crises in adult and paediatric patients aged 16 years and older with sickle cell disease.

New Merger-Acquisition Deal

Swiss drugmaker Novartis AG recently announced plans to buy cholesterol drug developer, The Medicines Company, for $9.7 billion. The acquisition will give Novartis access to Medicines Co.’s near-to-market heart drug — inclisiran. Medicines Co. is expected to submit the drug to the FDA for approval by the end of 2019. The company has high chances of getting a clearance from the authorities as it recently presented positive data confirming the efficacy of the drug.

Release of Positive Data

CRISPR Therapeutics (CRSP - Free Report) and its partner Vertex Pharmaceuticals Incorporated VRTX recently announced encouraging preliminary safety and efficacy data from the ongoing phase I/II studies. Notably, the studies are evaluating the CRISPR/Cas9 gene-editing therapy CTX001 for two severe blood disorders — sickle cell disease and adult transfusion-dependent b-thalassemia (TDT).

CRISPR Therapeutics and Vertex were each up 17% and 2.5%, respectively, on Nov 19, in response to the news. However, CRISPR lost some gains due to an underwritten public offering on the same day during after-hours trading (read: Genomics ETFs Surge on CRISPR's Gene Editing Progress).

Biotech ETFs in Focus

In the current scenario, we believe it is prudent to discuss a few ETFs which have considerably wide exposure to the companies discussed.

iSharesNasdaq Biotechnology ETF (IBB - Free Report)

This fund seeks to provide exposure to U.S. biotechnology stocks and tracks the NASDAQ Biotechnology Index. It comprises 215 holdings. It has AUM of $7.5 billion and charges a fee of 47 basis points a year. The fund gained 2.5% in yesterday’s trading session (read: Top-Ranked ETFs That Crushed the Market in a Month).

VanEck Vectors Biotech ETF (BBH - Free Report)

The underlying MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. It holds about 24 securities in its basket. Its AUM is $364.2 million and expense ratio is 0.35%. The fund gained 2.1% in yesterday’s trading session.

SPDR S&P Biotech ETF (XBI - Free Report)

The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 115 securities in its basket. Its AUM is $4.02 billion and expense ratio, 0.35%. The fund gained 4.3% in yesterday’s trading session (read: Healthcare ETFs Win in October: Here's Why).

First Trust Amex Biotechnology Index (FBT - Free Report)

The fund measures the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. It holds about 31 securities in its basket. Its AUM is around $1.73 billion and expense ratio is 0.57%. The fund gained 2.4% in yesterday’s trading session.

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