Should You Keep Your Portfolio Healthy With Biotech ETFs?

The biotech sector is going through the roof right now with SPDR S&P Biotech (MX:XBI) ETF XBI adding over 9% in a month (as of Sep 11, 2017). Plenty of factors are powering the sector. Among these, breakthrough U.S. Food and Drug Administration (FDA) approvals, success in the immune-oncology field, and mergers and acquisitions are at the forefront.

Biotech stock Vertex Pharmaceuticals (NASDAQ:VRTX) received a new FDA approval for cystic fibrosis drug, Kalydeco. In early September, FDA approved “Novartis AG' breakthrough gene transfer treatment, Kymriah (tisagenlecleucel) suspension for the treatment of patients up to 25 years of age with B-cell precursor acute lymphoblastic leukemia that is refractory or in second or later relapse,” as per the source.

Investors should note that CAR-T is a fresh immunocellular therapy and many companies are eyeing it. In fact, Gilead Sciences (NASDAQ:GILD) announced the buyout of Kite Pharma (NYSE:K) for $11.9 billion in late August (read: Biotech ETFs Soar on Gilead-Kite Deal). Kite Pharma is expected to receive approval for its CAR-T therapy axicabtagene ciloleucel (axi-cel) shortly. With this acquisition, Gilead will step into the new arena of oncology treatment, known as CAR-T, which targets the body’s own immune system to fight tumors.

Two months ago, Clovis Oncology (NASDAQ:CLVS) shares also skyrocketed following the company’s positive cancer drug data. The company then said that clinical trial data on its ovarian cancer drug treatment indicated that it may substantially help more patients than expected (read: 4 Stocks & ETFs to Buy on Clovis' Positive Drug Data).

If this was not enough, Teva Pharmaceutical (NYSE:TEVA) TEVA shares surged over 19% on Sep 11 as it appointed a former Novo Nordisk (CO:NOVOb) (NVO) as CEO. The new recruitment followed Teva’s last full-time CEO’s seven-month term and resignation amid a bribery scandal.

Compelling Valuation

Biotech stocks were the most hurt among the S&P 500 members last year. This has probably made the space cheap and helped it to be back with a bang. Biotech ETF XBI added about 17.7% in the last three months (as of Sep 11, 2017) while SPDR S&P 500 ETF (NYSE:SPY) (AX:SPY) was up 2.9%. The fund XBI has a relative strength index of 66.95. This means that the fund is yet to enter the overbought territory.

Also, fears over price gouging are ebbing substantially in the Trump administration. In a nutshell, the space is riding on research and development and may log more returns ahead.

ETFs to Tap

Below we highlight a few biotech ETFs that can benefit investors with solid gains (see all Health Care ETFs here).

Direxion Daily S&P Biotech Bull 3X LABU

Ultrapro Nasdaq Biotechnology Proshares UBIO

ProShares Ultra Nasdaq Biotechnology BIB

iShare Nasdaq Biotech ETF IBB

Bioshares Biotech Clinical Trial (HM:BBC)

VanEck Vectors Biotech ETF (LON:BBH)

Bioshares Biotech Products (BS:BBP)

Loncar Cancer Immunotherapy ETF CNCR

ALPS Medical Breakthroughs ETF (SI:SBIO)

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