ALPS Medical Breakthroughs ETF (SBIO)

[Green Money 00]

New Biotech ETF Hits the Market

By Chris Lange December 31, 2014 8:40 am EST
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The ALPS Medical Breakthroughs ETF (NYSEMKT: SBIO) debuted on the market Wednesday, December 31, 2014. This exchange traded fund will track the Poliwogg Medical Breakthroughs Index (PMBI), which is designed to capture research and development opportunities in biotechnology and pharmaceutical industries. The PMBI is made up of small-cap and mid-cap biotech stocks listed on U.S. exchanges.

The index has a unique but straightforward design. The basis for selection to be included in the index is that the company must be a biotech or pharmaceutical firm with one or more drugs in the Phase 2 or Phase 3 FDA clinical trials. Companies also must have a market cap between $200 million and $5 billion.

The liquidity for these companies included must be greater than $1 million moved daily, and the weighting will be modified by market cap, with a max 4.5% weighting at each rebalance.

The PMBI Index also has some opportunities for investors who are only seeking pure play exposure to emerging biotech companies. The index is tilted to small and mid-cap firms, which is generally where the innovation occurs and where a larger portion of investors’ dollars are spent on R&D. In contrast, large-cap biotech firms typically spend more investor dollars on marketing and distribution, as opposed to innovation.

Also the index will allow for efficient access to clinical trials for considerably cheaper than other competing biotech indexes. Compared to the Nasdaq Biotechnology Index, companies in the PMBI paid on average 74% less per clinical trial. Promising results from clinical trials can lead to acquisition by one of the large established players in the biotech or traditional pharmaceuticals industries.

The index helps to take out some of the risk for stock pickers from what is considered a particularly difficult and challenging industry.

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By Chris Lange

Read more: ALPS Medical Breakthroughs ETF Hits the Market (NYSEMKT: SBIO) - 24/7 Wall St. http://247wallst.com/healthcare-business/2014/12/31/new-biotech-etf-hits-the-market/#ixzz3O9JzRM62
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