The newest health care exchange-traded fund is unique in that three stalwarts of other industry funds aren’t even among its top holdings.
Gilead Sciences Inc. (GILD, Financial), Vertex Pharmaceuticals (VRTX) and Amgen Inc. (AMGN) are all heavily weighted in the iShares Nasdaq Biotechnology Index Fund (IBB, Financial) ETF and VanEck Vectors Biotech ETF (BBH, Financial) ETF. Gilead and Vertex are also prominent in the SPDR Series Trust S&P Biotech (XBI, Financial) ETF.
The ETF's number one holding is Inovio Pharmaceuticals Inc. (INO, Financial) at 6.73%. Others accounting for more than 5% include Alnylam Pharmaceuticals Inc. (ALNY, Financial), Novavax Inc. (NVAX, Financial) and Moderna Inc. (MRNA, Financial).
An article in CNN Money noted the recent surge in biotech initial public offerings, pointing out that share prices of the newly minted public companies have been driven up by enthusiastic investors. Yet, despite all the focus on treatments for Covid-19, none of the companies are working on coronavirus drugs.
"While Covid-19 is at the top of everyone's mind, the reality is there have been a number of other pandemic and epidemic events in the past few years," said Sam Masucci, founder and CEO of ETF Managers Group, which launched GERM.
The ETF's objective is to provide investors with direct exposure to the biotech companies working on testing and treatments for infectious diseases. The first-to-market methodology behind the fund focuses on the advancements in the infectious disease subsector of biotech with targeted exposure to U.S.-listed companies at the forefront of research and development, vaccines, therapies and testing technologies, according to ETF Managers Group’s news release.
The fund provides investors exposure to established providers as well as what it calls the “unsung heroes” of the biotech and life sciences market. The frequency and diversity of disease outbreaks, similar to Covid-19, have grown steadily for the past 30 years, the firm pointed out.
From January 2011 to January 2018, there were 38 epidemic events in the U.S. alone, and there are currently over 20 combined pandemics and epidemics affecting the world today, reported ETF Managers Group.
“The unfortunate emergence of the recent Covid-19 pandemic has brought mainstream emphasis to the value of the human vaccines market, expected to grow to $72.5 billion by 2024, representing a CAGR of 11.2% from 2016 to 2024,” it added.
Benzinga reported that GERM could eventually have some competition in the form of the BioThreat ETF (VIRS), which Pacer Financial filed plans for earlier this year. Other issuers have filed plans for ETFs inspired by the coronavirus, but those offerings revolve around work-from-home and other non-vaccine trends.
Shares of GERM are up nearly 10% to $27.90 since the fund started trading on June 18.
Disclosure: The author holds a position in Gilead Sciences and Amgen.
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