Many intriguing articles have been written about investing in biotechnology. Biotechnology investment has been referenced by many knowledgeable and respectable authors as controversial, out of favor, and even sexy (this article by Stephen Simpson, CFA, is must read). Surviving current trends in biotechnology stock price manipulation can be both stressful and disappointing. This leaves us all to wonder is it even worth it to try speculative biotechnology as an investment option?

StrongBio believes it is worth it, even if it results in losses that are hard to endure. In the end, contributions to healthcare from growing sources of capital are extremely important for improved patient care (termed supply-side capital). As these contributions have grown, however, so too has waste. With proper selection, timing, and diversification (three pillars of biotechnology investment), the common retail investor can eventually be financially rewarded as philanthropic goals of the population are met.

Simply put, biotechnology companies focus on drug development aiming to treat an unmet or under-met disease or medical condition. Companies that have succeeded have net sales in the tens of billions and total market values in the hundreds of billions of dollars. Speculative biotechnology companies, in contrast, differ from proven top biotechnology companies in that they often have no approved products or revenues.

Gary Pisano of Harvard Business School has done extensive modeling of biotechnology (and other technology) returns. Reports between 2006 and 2012 indicate that average biotechnology returns have been historically unimpressive; with 25-year returns of "market baskets" of biotech stocks yielding only about 10% per year. This means that much of the legendary "opportunity" in biotechnology stocks revolves around successful portfolio management of technological trend shifts and timing positions accordingly.

Much of the challenges lie in the fact that science experts tend to focus into niches instead of pursue interdisciplinary science. Scientists tend to lack fundamental economics or business expertise and vice-versa, with business leaders lacking science background.

So what if a speculative biotechnology company has shown positive data in a curative treatment for cancer? Many things can still go wrong for an investor. One should always have a plan for setbacks and delays. Sometimes clinical setbacks can occur requiring a company to delay a trial until regulatory requirements are met. Other delays are more business-oriented, with slated clinical trials held up due to lack of funding such as in poor economic times.

Even legal setbacks occur and can cost both time and money. And then we have the gatekeeper: FDA, and regulatory setbacks that can occur. The fact is most biotechnology projects fail. According to Pisano, the average biotechnology company is likely to fail 90% of the time, with companies that make it all the way to Phase 3 experiencing approximately 50% chance of success.

Multidisciplinary investment management increases the likelihood of a success, meaning, that many common retail investors are going to have to try to wear multiple hats when performing qualitative analyses. That's what StrongBio calls work. It's a lot of work. But knowing what to look for in each discipline can be of great service to the retail investor.

And if all of those pitfalls are not enough, going back to our legitimate cancer data success scenario, market manipulation and fake news from negative press can still make investors feel like their winners are losing investments for quite some time. Take for instance the 2016 situation with Celator Pharmaceuticals, which was driven down to $0.79 cents per share and rose 1600% when whatever market forces that were holding it down, along with negative press, finally gave up the fight to an obvious winner (having been bought out by Jazz Pharmaceuticals (NASDAQ:JAZZ).

The oppressive forces on the stock persisted right up until FDA review. Other company shareholders, like those of Northwest Biotherapeutics (NASDAQ:NWBO), allege that negative press and stock manipulation are linked. Immunomedics's (NASDAQ:IMMU) stock see-sawed back and forth several times between $2 and $5 (and even drew a halt from the SEC), market cap between 180 million and 500 million respectfully, in 2016 with alternating negative legal press by no less than 20 law firms and positive research press and stock price volatility. Extreme patience is required while waiting for "fair value."

The University of Chicago oncologist Mark Ratain postulated that a company with a market cap of less than $300 million is unlikely to succeed. Commonly known in biotechnology investment circles, the Feuerstein-Ratain rule, was a solid predictor in the past. This year companies are defying the 300 million rule. StrongBio believes the rule used to hold water because there was a predictable method to the involvement of big pharma in purchasing speculative biotechnology cancer stocks.

So either big pharma is no longer able to identify useful technologies and many are slipping through the cracks, which is unlikely, or something in the markets is changing. It is also possible that it was getting predictable to pick biotechnology successes based upon the highly successful metric by the well-respected Feuerstein and Ratain, so market makers have changed it up a little. Past open market buyout periods of obtaining shares of speculative stocks drove prices up as a whole (or held them flat for long periods of time) to approximately 300 million market caps. Accumulation such as this no longer seems to be in effect.

Whatever the mechanism of value assignment by the market, it is clear there is a new market pattern emerging in biotechnology, with lower than normal market caps. StrongBio believes there may be several contributing reasons for this. One, investment levels are predicted to be the lowest that they have been since 1947. This is also true in the investment banking sector, a big source of biotechnology funding.

Simply put we have not had a great investment economy, and risky biotechnology may be regarded as an irresponsible investment during tough financial times. Because new patterns on speculative biotechnology company stocks show suppression over periods of months and years, it is possible there just is not as much retail and/or institutional support as in years past.

Two, is the SEC unconscious at the wheel or did someone outsource that job to Asia? This query addresses concern over foreign-based or hostile entities' ability to starve funding for cash hungry technology companies when they need to sell stock. In recent years, an increase in foreign companies cheaply acquiring U.S. biotechnologies developed at tax-payer-supported universities and other technologies funded by state and local governments has plagued markets.

New stock exchanges like IEX have even been set up in an attempt to thwart different kinds of financial manipulation utilizing delays in trade execution (read this book or a synopsis about it in Flash Boys; it's fascinating). However, the market is currently responding to new executive political leadership in a corrective way. One can always hope that a nation of laws will have proper enforcement.

Three, short sellers have influenced stock prices (being respectful of regulations) for a long time, but not to the extent that manipulation is occurring now. Foreign countries like those in Western Europe, Australia and Canada have entirely outlawed the practice of shorting on their own stock exchanges. This indicates these countries have identified that stocks were oversold and manipulated and regulations and laws limiting short sales were not able to control it.

It would appear pretty obvious to those following speculative biotechnology that the same is occurring in the U.S. For instance, one exploring and mining company presented evidence to the SEC of a naked short position in the hundreds of billions of shares. Regardless of mechanism there may be a way to estimate increases in short-selling using well established metrics in biotechnology.

StrongBio cites the 2016 failures (and likely more in 2017) of the long-established Feuerstein-Ratain rule as evidence NOT that the metric is somehow flawed, but rather that market conditions have changed. The 300 million "rule" is now as dated as 4-inch tile countertops for kitchens and bathrooms, and has likely been rendered obsolete by rampant stock price manipulation. But that does not mean that one should abandon biotechnology investments.

Eventually, a fair value is decided between a suitor and company management if something in the pipeline passes FDA and can be sold. Since Celator (NASDAQ:CPXX) rendered the Feuerstein-Ratain rule obsolete at a market cap of less than $100 million, and Immunomedics obtained FDA breakthrough therapy status in triple negative breast cancer at about $160 million, we know the static threshold value of 300 million is no longer even close to critical mass for the metric.

Out of fairness, the metric can be influenced by other factors such as a changing FDA landscape as well, but that wouldn't explain the difference in market cap as the FDA does not participate in stock pricing or market making per se. It follows that if market regulation returns to prior levels, the metric threshold would increase back to 300 million.

How much lower can the Feuerstein-Ratain critical threshold go? That may depend in part how many shares can be shorted in a given company. StrongBio cites here mention of a gnarly cancer drug company from a recent article by an author of the metric that has approvable Phase 3 data. According to a report by H.C. Wainright, this 40 million market cap company, CytRx (NASDAQ:CYTR), is likely to get some kind of approval pathway for aldoxorubicin on its statistically significant Phase 3 sarcoma data, where it outperformed all 5 other drugs in the study.

One might approximate that if short selling is the cause for lower market cap FDA approvals in cancer, estimates based upon how much additional share supply exists now versus when the rule was working can be made. 300 million, the past metric threshold, divided by 40 million, the current potential low, gives a WHOPPING 7.5-fold more potential share supply (provided to the market by short selling). This assumes that the relationship between stock price and shorting of shares has some kind of linear and direct relationship, such as common economic supply and demand curves.

This implies the Feuerstein-Ratain metric tool is a dynamic sliding-threshold subject to changing market factors. One might argue that a linear relationship would be less representative for a "real world" sigmoidal supply and demand model, such as that proposed by Alfred Marshall. These curves break from a linear path to form a smooth parabolic curve with sigmoid limits because of factors such as wear and tear of production equipment, transportation limits, and other practical factors in supply-side analysis. In an electronic market system of a thinly traded biotechnology stock, it is unlikely these factors are relevant.

This emerging scenario creates an even greater margin for profit if one can properly select stocks that are at a record low market cap threshold for FDA approval in cancer, sometimes called short squeeze. At some point, speculative biotechnology companies get a fair value assigned if management is honest enough to serve their fiduciary duty to shareholders. It is at the point of buyout that fair value was reached for CPXX. Fair value soon will be reached for IMMU based upon significant partnership (Seattle Genetics, SGEN) and possibly even CYTR.

StrongBio cautions the reader that CytRx has been accused of hiring stock promotion media in the past, and its pillar of honor might have been "pierced." Nonetheless it appears that after a substantial period of risk everything that was promoted is likely to be true. In addition, remember that biotechnology investment in a "market basket" of companies typically returns about 10%. StrongBio does not recommend deviating from this basket approach, but rather by changing weighting late into development and after dilutions, obtain higher than 10% returns when possible.

The primary pillar of biotechnology stock investing, selection, is obviously a critical factor, standing tall in front of the pillar of timing. How can we avoid picking a loser? The second pillar of timing comes down to choosing a company with favorable Phase 3 data as they meet with FDA in a type B meeting (where FDA reviews the data outcomes of a clinical study) and an abnormally low stock price compared to the annual market its product will serve.

These two pillars stand in synergism, as one doesn't have a favorable investment with only one solid pillar supporting a portfolio candidate under current market conditions. It is important to invest lightly at first so that lower prices do not cause harm to a portfolio. If the stock runs up just be happy you had a little.

The pitfall of regulatory hurdles is always a major concern, but there is circumstantial evidence that the FDA will be easing some burdens. Cancer drug shortages (such as existed for doxorubicin in December 2016) can be thwarted by increasing the number of suppliers and approving safer more effective derivatives. The FDA may favor competition to lower prices of potentially egregious monopolies. Cancer treatment in the hospital environment is currently trending towards increasing physician options and information as well as for patient-physician interaction as well.

For instance, some drugs may be hard on the liver and not be good for alcoholics, whereas other drugs may be rough on the heart, and be contra-indicated for heart attack sufferers. So demonstration of comparable efficacy may be acceptable if safety is improved for subsets of patients. Whether the desire for increased options will spread from cancer to other indications remains to be seen.

However it is no secret that Trump intends to "slash restraints" artificially put on drug makers by the FDA. If these trends come to fruition, StrongBio expects the chance of success of biotechnology companies to increase, but the markets for some drugs may sink into smaller niches of sales with greater total options available.

So there are certainly the same past investment risks that the FDA will not view data as favorable or that companies will have a hard time proving they can meet production standards for NDA approval, including lot to lot consistency. Oftentimes a speculative biotechnology company can partner this production with a number of firms.

But the reward to risk ratio can at least be dynamically tuned for investment success. With proper selection, timing, and diversification, StrongBio estimates that new regulatory policies and market conditions will make biotechnology investment potentially more common and successful as the outdated thresholds of the past are readjusted to guide investors.

Disclosure: I am/we are long IMMU CYTR.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Go here to see the original:
Why Should Investors Consider An Allocation In Speculative Biotechnology: A Sector Analysis - Seeking Alpha

On March 9, 2017, the National Academies of Sciences, Engineering, and Medicine (National Academies) published a report entitled Preparing for Future Products of Biotechnology, prepared by the Committee on Future Biotechnology Products and Opportunities to Enhance Capabilities of the Biotechnology Regulatory System (Committee). The Committee was asked to describe the possible future products of biotechnology that will arise over the next five to ten years, as well as provide some insights that can help shape the capabilities within the U.S. Environmental Protection Agency (EPA), the U.S. Food and Drug Administration (FDA), and the U.S. Department of Agriculture (USDA) as they move forward. According to the Committee, agencies may be overwhelmed by the number and diversity of new biotechnology products. The Committee states that the agencies should increase their scientific capabilities, tools, and expertise in key areas of expected growth. The report reflects the Committees deliberations regarding the future products of biotechnology that are likely to appear on the horizon, the challenges that the regulatory agencies might face, and the opportunities for enhancing the regulatory system to prepare for what might be coming. The Committee reached consensus on conclusions and recommendations that are based on extensive information gathering, Committee discussions, and input from a wide variety of communities interested in biotechnology. A copy of the slides used during a National Academies webinar on the report can be found on the National Academies website.

On July 2, 2015, the White House Office of Science and Technology Policy, the Office of Management and Budget, the U.S. Trade Representative, and the Council on Environmental Quality issued a memorandum, Modernizing the Regulatory System for Biotechnology Products, directing EPA, FDA, and USDA to update the Coordinated Framework for the Regulation of Biotechnology (Coordinated Framework). The Obama Administration asked the agencies to accomplish three tasks:

Clarify the current roles and responsibilities of the EPA, FDA, and USDA in the regulatory process;

Develop a long-term strategy to ensure that the federal regulatory system is equipped to assess efficiently the risks, if any, of the future products of biotechnology; and

Commission an expert analysis of the future landscape of biotechnology products.

As reported previously, on January 4, 2017, the White House announced the release of the 2017 Update to the Coordinated Framework for the Regulation of Biotechnology. The 2017 Update provides a comprehensive summary of the roles and responsibilities of EPA, FDA, and USDA with respect to regulating biotechnology products. Together with the National Strategy for Modernizing the Regulatory System for Biotechnology Products, published in September 2016, the 2017 Update offers a complete picture of a robust and flexible regulatory structure that provides appropriate oversight for all products of modern biotechnology. Within that regulatory structure, the federal agencies maintain high standards that, based on the best available science, protect health and the environment, while also establishing transparent, coordinated, predictable and efficient regulatory practices. More information is available in the White House blog item, Increasing the Transparency, Coordination, and Predictability of the Biotechnology Regulatory System.

The July 2, 2015, memorandum called for the commission of an external, independent analysis of the future landscape of biotechnology products. EPA, FDA, and USDA commissioned the National Academies to prepare an analysis to identify potential new risks and frameworks for risk assessment and areas in which the risks or lack of risks relating to the products of biotechnology are well understood. This analysis is presented in the report prepared by the Committee that was released on March 9, 2017.

The Committee was tasked to:

Describe the major advances and the potential new types of biotechnology products likely to emerge over the next five to ten years;

Describe the existing risk-analysis system for biotechnology products including, but perhaps not limited to, risk analyses developed and used by EPA, USDA, and FDA, and describe each agencys authorities as they pertain to the products of biotechnology;

Determine whether potential future products could pose different types of risks relative to existing products and organisms. Where appropriate, identify areas in which the risks or lack of risks relating to the products of biotechnology are well understood; and

Indicate what scientific capabilities, tools, and expertise may be useful to the regulatory agencies to support oversight of potential future products of biotechnology.

Human drugs and medical devices were not included in the purview of the study.

To address its statement of task, the Committee gathered information from a number of sources, and heard from over 70 speakers over the course of three in-person meetings and eight webinars. The Committee received responses to a request for information from a dozen federal agencies, and solicited statements and written comments from members for the public. According to the report, the Committee defined biotechnology products as products developed through genetic engineering or genome engineering (including products where the engineered DNA molecule is itself the product, as in an engineered molecule used as a DNA information-storage medium) or the targeted or in vitro manipulation of genetic information of organisms, including plants, animals, and microbes. The term also covers some products produced by such plants, animals, microbes, and cell-free systems or products derived from all of the above.

The Committee grouped future products into three major classes:

Open-release products: The open-release products that the Committee saw on the horizon include plants, animals, microbes, and synthetic organisms that have been engineered for deliberate release in an open environment. According to the report, the ability to sustain existence in the environment with little or no human intervention is a key change between existing products of biotechnology and some of the future ones anticipated in this class. The report states that the Committee thought that future open-release products would be developed for familiar uses, such as agricultural crops, but would also likely be developed for uses such as cleaning up contaminated sites with engineered microbes, replacing animal-derived meat with meat cultured from animal cells, and controlling invasive species through gene drives;

Contained products: The Committee concluded that future biotechnology products that are produced in contained environments are more likely to be microbial based or synthetically based rather than based on an animal or plant host. According to the report, organisms of many genera are used in fermenters to produce commodity chemicals, fuels, specialty chemicals or intermediates, enzymes, polymers, food additives, and flavors. When considering the laboratory as a contained environment, the report states that many examples of transgenic animals from vendors are widely used today for research and development. Because performing biotechnology in contained environments allows higher control over the choice of host organism, systems with advanced molecular toolboxes are already in high use; and

Platforms: Biotechnology platforms are tools that are used in the creation of other biotechnology products, according to the report, including products that are traditionally characterized as wet lab, such as DNA/RNA, enzymes, vectors, cloning kits, cells, library prep kits, and sequencing prep kits, and products that are dry lab, such as vector drawing software, computer-aided design software, primer calculation software, and informatics tools. The report states that these two categories continue to meld as newer approaches are published or commercialized.

The report notes that there are a variety of technical, economic, and social trends that drive and will continue to drive the types of biotechnology products developed in the next decade. Technical and economic trends in the biological sciences and biological engineering are accelerating the rate at which new product ideas are formulated and the number of actors who are involved in product development. The report states that with regard to social trends, it was evident to the Committee that there are many competing interests, risks, and benefits regarding future biotechnology products. According to the report, it was clear that the U.S. and international regulatory systems will need to achieve a balance among these competing aspects when considering how to manage the development and use of new biotechnology products.

The Committee found that the Coordinated Framework appears to have considerable flexibility in statutory authority to cover a wide range of biotechnology products. The jurisdictions of EPA, FDA, and USDA are defined in ways that may leave gaps or redundancies in regulatory oversight, however. According to the report, even when jurisdiction exists, the available legal authorities may not be ideally tailored to new and emerging biotechnology products. Other agencies will likely have responsibilities to regulate some future biotechnology products, and their roles are not well specified in the Coordinated Framework.

The report states that the Committee found that the complexity of the existing biotechnology regulatory system, which could appear fragmented, results in a system that is difficult for product developers -- including individuals, nontraditional organizations, and small enterprises, as well as consumers, product users, and interested members of the public to navigate. The complexity can cause uncertainty and a lack of predictability for developers of future biotechnology products and creates the potential for loss of public confidence in oversight of future biotechnology products.

According to the report, the increased rate of new product ideas means that the types and number of biotechnology products in the next five to ten years may be significantly larger than the current rate of product introduction. The report cautions EPA, FDA, USDA, and other relevant agencies to prepare for this potential increase, including finding effective means of evaluation that maintains public safety, protects the environment, and satisfies the statutory requirements appropriate for each agency. The increased number of actors involved in product development means that the regulatory agencies will need to be prepared to provide information regarding the regulatory process to groups that may have little familiarity with the Coordinated Framework.

According to the report, advances in biotechnology are leading to products that involve the transformation of less familiar host organisms, have multiple engineered pathways, are comprised of DNA from multiple organisms, or are made from entirely synthetic DNA. Such products may have few or no comparators to existing nonbiotechnology products, which function as the baseline of comparison in current regulatory risk assessments of biotechnology products.

For future biotechnology products in all degrees of complexity and novelty, the Committee considered the risk assessment endpoints related to human health or environmental outcomes, such as illness, injury, death, or loss of ecosystems function. The Committee concluded that these endpoints are not new, but the intermediate steps along the path to those endpoints may be more complex, more ambiguous, and less well characterized than those for existing biotechnology products. According to the report, the scope, scale, complexity, and tempo of biotechnology products likely to enter the regulatory system in the next five to ten years have the potential to critically stress EPA, FDA, and USDA, both in terms of capacity and expertise.

At a high level, the Committee found that there are existing frameworks, tools, and processes for risk analyses and public engagement that can be used to address the issues likely to arise in future biotechnology products in a way that balances competing issues and concerns. Given the profusion of biotechnology products that are on the horizon, however, there is a risk that the capacity of the regulatory agencies may not be able to provide efficiently the quantity and quality of risk assessments that will be needed. The report states that an important approach for dealing with the increase in the products will be the increased use of stratified approaches to regulation, where new and potentially more complex risk analysis methods will need to be developed for some products, while established risk analysis methods can be applied or modified to address products that are familiar or that require less complex risk analysis. To help articulate what capabilities, tools, and expertise might be useful to meet these objectives, the Committee created a conceptual map for decision-making aimed to assess and manage product risk, streamline regulation requirements, and increase transparency.

The Committee identified the following broad themes regarding future opportunities for enhancement of the U.S. biotechnology regulatory system:

The bioeconomy is growing rapidly and the U.S. regulatory system needs to provide a balanced approach for consideration of the many competing interests in the face of this expansion;

The profusion of biotechnology products over the next five to ten years has the potential to overwhelm the U.S. regulatory system, which may be exacerbated by a disconnect between research in regulatory science and expected uses of future biotechnology products;

Regulators will face difficult challenges as they grapple with a broad array of new types of biotechnology products -- for example, cosmetics, toys, pets, and office supplies -- that go beyond contained industrial uses and traditional environmental release (for example, Bacillus thuringiensis (Bt) or herbicide-resistant crops);

The safe use of new biotechnology products requires rigorous, predictable, and transparent risk-analysis processes whose comprehensiveness, depth, and throughput mirror the scope, scale, complexity, and tempo of future biotechnology applications; and

In addition to the conclusions and recommendations from this report, EPA, FDA, USDA, and other agencies involved in regulation of future biotechnology products would benefit from adopting recommendations made by previous National Academies committees related to future products of biotechnology that are consistent with the findings and recommendations in this report.

On the basis of its conclusions, the Committee developed a number of detailed recommendations regarding actions that can be taken to enhance the capabilities of the biotechnology regulatory system to be prepared for anticipated future products of biotechnology.

EPA, FDA, USDA, and other agencies involved in regulation of future biotechnology products should increase scientific capabilities, tools, expertise, and horizon scanning in key areas of expected growth of biotechnology, including natural, regulatory, and social sciences;

EPA, FDA, and USDA should increase their use of pilot projects to advance understanding and use of ecological risk assessments and benefit analyses for future biotechnology products that are unfamiliar and complex and to prototype new approaches for iterative risk analyses that incorporate external peer review and public participation; and

The National Science Foundation, the Department of Defense, the Department of Energy, the National Institute of Standards and Technology, and other agencies that fund biotechnology research with the potential to lead to new biotechnology products should increase their investments in regulatory science and link research and education activities to regulatory-science activities.

The report is well written and contains a significant amount of new and valuable information on the types of new biotechnology products being innovated and coming into commerce, trends of note regarding future products, and regulatory gaps and redundancies that need to be addressed. This background information is clearly presented and supports well the conclusions that are essential to understand, and the recommendations that are in urgent need of response.

That the federal agencies tasked with regulating biotechnology products need increased funding and organizational retooling to address the challenges eloquently and convincingly described in the report are truths beyond dispute. In this political climate, and under this Administration, meeting these needs will be challenging. Shareholders of all sorts in the biotechnology area -- businesses, innovators, environmental and public health activists -- are urged to weigh in and express support for the allocation of resources needed to fulfill the reports recommendations. Future generations of biotechnology products are on the line and at risk if these recommendations fall on deaf ears.

2017 Bergeson & Campbell, P.C.

See the article here:
National Academies Report Finds Future Biotechnology Products May Overwhelm Agencies - The National Law Review

March 14, 2017 7:54am NASDAQ:IBB

From Zacks: 2016 was a tough year for biotech stocks with the sector facing a lot of criticism for rising drug prices. Although shares did rally post-election in November on hopes that drug pricing would not be a key focus area under a Donald Trump presidency, the rally turned out to be short-lived following the Presidents views regarding drug pricing.

Trump made it clear that he does not like what happened to drug prices and he will bring them down.

Drug pricing was not the only issue that impacted the sector last year 2016 was also disappointing from an R&D perspective with a fewer number drugs managing to gain FDA approval. There were some high-profile pipeline failures as well. Other factors that weighed on the sector include mixed results, slower-than-expected new product launches and increasing competition.

The impact of these issues resulted in the NASDAQ Biotechnology Index declining 19.1% in 2016. However, the sector is showing signs of recovery this year with the index gaining 12.4%year-to-date (YTD). (Read: Top-Ranked ETFs That Crushed S&P 500 in the Bull Market)

Drug Pricing Will Remain a Headline Risk

With drug pricing being a populist issue, it looks like the spotlight will remain on rising drug prices in 2017 as well. According to the Jan 2017 Kaiser Health Tracking poll, affordability of prescription drugs remains at the top of the publics priority list for the President and Congress focus should be on ensuring the affordability of high-cost drugs to people who need them and taking steps to lower prescription drug prices.

President Trumps recent tweet that he is working on a new system where there will be competition in the Drug Industry and pricing for the American people will come way down will keep the biotech industry on edge. While it is clear that the government intends to address the drug pricing issue, there is no clarity on what steps will be taken.

Biosimilars Pose a New Threat

Another challenge being faced by the sector is the recent entry of biosimilar competition in the U.S. While a relatively new area, the market for biosimilars is huge and highly lucrative with several blockbuster biologics including Humira and Lantus slated to lose patent protection by 2020. Biosimilars are expected to reduce healthcare costs and provide a large number of patients with access to much needed biologic treatments. Biosimilars are also gaining acceptance across formularies. (Read: Trumps Defense Spending Plans Make These ETFs Buys Again)

Deals to Pick Pace?

Licensing agreements and deals including those with opt-in arrangements should continue being signed with immuno-oncology remaining a favorite area. Moreover, major biotech and pharma companies should gain from Trumps proposed tax plan and proposal to repatriate corporate profits held offshore at a one-time tax rate.

Given the possibility of repatriation of funds, chances are that M&A activity will pick up as the year progresses big companies with deep pockets often look to replenish and boost their pipelines as well as portfolios by acquiring companies with innovative pipelines and technology. Meanwhile, small bolt-on acquisitions will continue. (Read: Play These Stocks & ETFs If Fed Acts in March)

Companies with innovative technologies and pipelines are highly sought after. Niche disease areas like nonalcoholic steatohepatitis (NASH), immuno-oncology and multiple sclerosis are in demand. Treatments for orphan diseases are also much sought after with quite a few deals being signed in these areas.

New Products Should Gain Traction

Highly-awaited new products that gained approval over the last couple of years should contribute significantly to revenues. The FDA approved 22 new drugs in 2016 including Exondys 51 (Duchenne muscular dystrophy), Epclusa (hepatitis C virus), Ocaliva (rare, chronic liver disease), Zinbryta (multiple sclerosis), and Venclexta (chronic lymphocytic leukemia in patients with a specific chromosomal abnormality) among others. The agency also expanded the label of cancer drugs like Kyprolis and Imbruvica.

Meanwhile, so far in 2017, the FDA has approved 5 new drugs including Trulance (treatment of chronic idiopathic constipation in adults) and Parsabiv (treatment of secondary hyperparathyroidism in adult patients with chronic kidney disease undergoing dialysis).

ETFs in Focus

Highlighted below are some biotech ETFs ETFs present a low-cost and convenient way to get a diversified exposure to the sector.

iShares Nasdaq Biotechnology (IBB)

IBB, launched in Feb 2001 by BlackRock Investments LLC, tracks the Nasdaq Biotechnology Index. The fund mainly covers biotech stocks (81.6%) with pharma accounting for 10.8%, life sciences tools & services for 7.3%, Health care technology for 0.1%, Health care equipment for 0.11% and Health care supplies for 0.07%. The top 3 holdings include Amgen Inc. (9.23%), Celgene Corporation (7.72%) and Biogen Inc. (7.42%). The total assets of the fund as of Mar 7, 2017 were $8.38 billion representing 162 holdings. The funds expense ratio is 0.47% while dividend yield is 0.16%. The trading volume is roughly 1,491,728 shares per day.

SPDR S&P Biotech ETF (XBI)

XBI, launched in Jan 2006 by State Street Global Advisors, tracks the S&P Biotechnology Select Industry Index. The fund covers health care stocks only. The top 3 holdings include ARIAD Pharmaceuticals, Inc. (3.98%), Clovis Oncology, Inc. (3.76%), and ACADIA Pharmaceuticals Inc. (2.74%). The total assets of the fund as of Mar 8, 2017 were $2.9 billion representing 88 holdings. The funds expense ratio is 0.35% while dividend yield is 0.21%. The trading volume is roughly 4,427,722 shares per day.

First Trust NYSE Arca Biotech ETF (FBT)

FBT, launched in Jun 2006 by First Trust Advisors, tracks the NYSE Arca Biotechnology Index. The top 3 holdings include Kite Pharma, Inc. (4.77%), Alnylam Pharmaceuticals, Inc. (3.98%) and Nektar Therapeutics (3.77%). The total assets of the fund as of Mar 7, 2017 were $902 million representing 30 holdings. The funds expense ratio is 0.55% while dividend yield is nil. The trading volume is roughly 44,417 shares per day.

VanEck Vectors Biotech ETF (BBH)

BBH, launched in Dec 2011 by Van Eck, tracks the Market Vectors US Listed Biotech 25 Index. The fund covers health care stocks. The top 3 holdings include Amgen Inc. (12.13%), Celgene Corporation (10.73%) and Gilead Sciences Inc. (10.72%). The total assets of the fund as of Mar 8, 2017 were $702.5 million representing 26 holdings. The funds expense ratio is 0.35% while dividend yield is 0.21%. The trading volume is roughly 50,198 shares per day.

PowerShares Dynamic Biotech & Genome ETF (PBE)

PBE, launched in Jun 2005 by Invesco PowerShares, tracks the Dynamic Biotech & Genome Intellidex Index. The top 3 holdings include Incyte Corporation (5.38%), Vertex Pharmaceuticals Inc. (5.19%), and Regeneron Pharmaceuticals, Inc. (5.1%). The total assets of the fund as of Mar 8, 2017 were $245.6 million representing 31 holdings. The funds expense ratio is 0.50% while dividend yield is 0.34%. The trading volume is roughly 27,517 shares per day.

Conclusion

Although it may take a while for the dust around the drug pricing issue to settle down, pipeline success in innovative and important therapeutic areas, cost-cutting, share buybacks, new products, increased pipeline visibility and appropriate utilization of cash should help restore investor confidence in biotech stocks.

The iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB) fell $0.66 (-0.22%) in premarket trading Tuesday. Year-to-date, IBB has gained 13.28%, versus a 6.39% rise in the benchmark S&P 500 index during the same period.

IBB currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #2 of 36 ETFs in the Health & Biotech ETFs category.

This article is brought to you courtesy of Zacks Research.

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Have Biotech ETFs Finally Bottomed? - ETF Daily News (blog)

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Puma Biotechnology Inc is a A biopharmaceutical company

PBYI - Market Data & News

PBYI - Stock Valuation Report

Puma Biotechnology Inc (PBYI) had a good day on the market for Monday March 13 as shares jumped 11.86% to close at $44.80. About 1.88 million shares traded hands on 13,031 trades for the day, compared with an average daily volume of 972,852 shares out of a total float of 36.95 million. After opening the trading day at $40.05, shares of Puma Biotechnology Inc stayed within a range of $45.20 to $39.80.

With today's gains, Puma Biotechnology Inc now has a market cap of $1.66 billion. Shares of Puma Biotechnology Inc have been trading within a range of $73.27 and $19.74 over the last year, and it had a 50-day SMA of $34.81 and a 200-day SMA of $42.33.

Puma Biotechnology Inc is a biopharmaceutical company. It is engaged in the acquisition, development and commercialization of products to enhance cancer care.

Puma Biotechnology Inc is based out of Los Angeles, CA and has some 160 employees. Its CEO is Alan H. Auerbach.

For a complete fundamental analysis of Puma Biotechnology Inc, check out Equities.coms Stock Valuation Analysis report for PBYI.

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Puma Biotechnology Inc is also a component of the Russell 2000. The Russell 2000 is one of the leading indices tracking small-cap companies in the United States. It's maintained by Russell Investments, an industry leader in creating and maintaining indices, and consists of the smallest 2000 stocks from the broader Russell 3000 index.

Russell's indices differ from traditional indices like the Dow Jones Industrial Average (DJIA) or S&P 500, whose members are selected by committee, because they base membership entirely on an objective, rules based methodology. The 3,000 largest companies by market cap make up the Russell 3000, with the 2,000 smaller companies making up the Russell 2000. It's a simple approach that gives a broad, unbiased look at the small-cap market as a whole.

To get more information on Puma Biotechnology Inc and to follow the companys latest updates, you can visit the companys profile page here: PBYIs Profile. For more news on the financial markets and emerging growth companies, be sure to visit Equities.coms Newsdesk. Also, dont forget to sign-up for our daily email newsletter to ensure you dont miss out on any of our best stories.

All data provided by QuoteMedia and was accurate as of 4:30PM ET.

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Puma Biotechnology Inc (PBYI) Soars 11.86% on March 13 - Equities.com