Biotech ETF Industry Outlook

The biotech sector has had a rough start to the year with the NASDAQ Biotechnology Index declining approximately 16% year-to-date. Sector-specific issues like increasing political and media focus on high price tags for new drugs and the changing competitive scenario have been weighing on biotech stocks over the last few quarters.

However, the sector’s fundamentals remain strong and mergers and acquisitions (M&As), product approvals and positive data flow should act as catalysts. (Read: Biotech ETFs in Focus After Mylan’s EpiPen Controversy)

Drug Pricing to Remain in Focus

With Presidential candidates, policymakers, the media and the general public focusing on the high price tags for drugs, drug companies may find it a bit difficult to justify their high prices by citing the years and funds that go into bringing new treatments to market and the need to invest in R&D to bring additional treatments to market.

According to the Oct 2015 Kaiser Health Tracking poll, affordability of prescription drugs remains at the top of the public’s 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.

In this scenario, the drug pricing issue is not likely to die down easily -- at least not until elections are over. Proposed health care plans include suggestions on how to rein in the prices of new drugs.(Read: Clinton vs. Trump—Best Stocks & ETFs to Bet on)

Biosimilars Gaining Importance

With the FDA approval of the first biosimilar in the U.S. (Sandoz’s Zarxio – a biosimilar of Amgen’s Neupogen) last year, this area is fast gaining importance with a lot of companies working on bringing biosimilars of blockbuster biologic treatments to market.

Pfizer and Celltrion’s biosimilar version of Johnson & Johnson’s blockbuster drug Remicade gained FDA approval earlier this year while the agency is expected to decide on the approval status of Amgen’s biosimilar version of AbbVie’s Humira in Sep 2016.

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