It’s that time of year again. January brings with it an array of marquee industry conferences, one of which is the annual J.P. Morgan Healthcare Conference, which commences today in San Francisco.
The four-day confab is widely viewed as one of the most important events on the yearly healthcare calendar and has a history of being a catalyst for some biotechnology and pharmaceutical equities. Following a sluggish showing by the healthcare sector in 2023 and a now multi-year funk for biotech stocks and exchange traded funds, there’s optimism that the conference will stoke near-term upside for healthcare assets.
That optimism is fueled in part by recent inklings of a resurgence by biotech stocks and ETFs. Over the past month, the widely followed Nasdaq Biotechnology Index is higher by 11.74%. It remains to be seen if the industry can build on those gains, but that run is undoubtedly a solid foundation for a longer-ranging rebound and one that the J.P. Morgan Healthcare Conference can potentially build upon.
With that in mind, here are several biotech ETFs that could be worth monitoring over the near-term and as 2024 unfolds.
Global X Genomics & Biotechnology ETF (GNOM)
As its name implies, the Global X Genomics & Biotechnology ETF (GNOM) focuses on genomics, which also includes various therapies. That’s a high risk/high reward corner of the biotechnology space, but for risk-tolerant investors, this biotech ETF has compelling long-term potential.
Consider the following. In a recent report, GlobalData said the global market for cell and gene therapies could expand to $80 billion by 2029. Should that forecast prove accurate, it would likely elevate some of the mid- and small-cap names that dot the GNOM lineup to large-cap territory, providing investors with big gains along the way. Additionally, GNOM member firms are likely compelled to advance trials and the like because international competition is increasing.
“With lower R&D development costs than in advanced markets, countries like China are becoming attractive markets for development of CGT and therefore may emerge as strong competitors of overseas-made CGT,” notes Urte Jakimavicuite, GlobalData’s senior director of research services.
ALPS Medical Breakthroughs ETF (SBIO)
The J.P. Morgan conference has a history of being a starting point for biotech mergers and acquisitions and that’s relevant to investors considering the ALPS Medical Breakthroughs ETF (SBIO) because this biotech ETF has a track record of being home to takeover targets. In its roughly nine years on the market, SBIO has seen dozens of its components acquired by larger rivals.
One reason for that is the biotech ETF’s methodology. Upon inclusion, SBIO member firms are capped at market values of $5 billion – an attractive area for suitors. Plus, the S-Network Medical Breakthroughs Index – SBIO’s underlying benchmark – mandates that member firms have at least one drug or therapy in Phase II or III clinical trials. That defrays some of the risk for potential suitors. Good news: biotech consolidation showed signs of life last year.
“According to data from the London Stock Exchange Group, pharma and biotech deal-making bucked a decline in global M&A activity in 2023, rising 38% and 45% in value from the prior year, respectively, despite a slight drop in quantity,” reports Seeking Alpha.
SPDR S&P Biotech ETF (XBI)
The SPDR S&P Biotech ETF (XBI), which is one of the oldest and largest biotech ETFs, is relevant now because some analysts are constructive on mid- and small-cap biotech stocks. XBI holds 124 stocks, but it’s an equal-weight ETF, meaning it leans into the size factor. As a result, the average market capitalization of this biotech ETF’s components is just $14.82 billion, or just beyond the high end of mid-cap territory.
The $6.96 billion XBI is showing signs of life as highlighted by a 13.32% gain over the past month. More could be in store if analysts are correct in their outlooks on smaller biotech stocks.
“At a high level, we remain encouraged by sector fundamentals, including R&D output (contribution to new product approvals) and external demand for biotech innovation (measured by M&A trends),” according to Bank of America.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Todd Shriber
Todd Shriber got his start in financial markets as a reporter with Bloomberg News. Later, he became a trader at a Southern California-based long/short hedge fund where he specialized in trading sector and international ETFs leading up to and during the financial crisis. He would later become the web editor at ETF Trends. Currently, he analyzes, researches and writes on ETFs for a variety of Web-based publications and financial services firms.Shriber has been quoted in the Barron's, CNBC.com and the Wall Street Journal. His work has been published on Web sites such as Benzinga, ETF Daily News, ETF Trends, MarketWatch, Fox Business and Nasdaq.com.
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