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>>> Generic Drug ETF Offering Portfolio Cure


Gregg Greenberg

Feb 12, 2016


Generic Drug ETF Offering Portfolio Cure



https://www.thestreet.com/story/13458013/1/generic-drug-etf-can-dodge-biotech-smackdowns.html


With biotech stocks getting smashed on the stock market and big pharma getting hammered on the presidential campaign trail, generic drug stocks look awfully appealing, said James Duffy, product manager at Van Eck Global.

"Generics will benefit from the ongoing push to lower health care costs," said Duffy. "Another good reason is the big push now into biosimilars, the generic forms of the big biotech drugs that we have been hearing so much about over the past 10 or 15 years."

Last month, Van Eck introduced Market Vectors Generic Drugs ( GNRX) , the first ETF to target global manufacturers of generic drugs and biosimilars. Shares of the fund are down almost 9% since the fund's Jan. 13 launch.

Duffy pointed out that according to the Generic Pharmaceutical Association, 88% of the drugs dispensed in the U.S. are generics. He added that spending on generics, as a percentage of drugs distributed globally, is expected to increase from 40% in 2013 to 46% in 2018.

One of the benefits of the GNRX, in Duffy's view is the international diversification of the fund. As of Dec. 31, 39% of the constituents in GNRX's underlying index were domiciled in the United States, with India, Israel, South Korea and Japan having the next largest country weightings, respectively. Approximately 76% of the index's constituents were large-cap companies, those with market caps of more than $6 billion, while 24% were mid-caps ranging from $1.5 billion to $6 billion in size.

As of the end of January, the fund's top holdings were Teva, 8.5% of assets; Allergan, 8.4%; Sun Pharmaceutical, 6.5%; Baxalta, 5.6%, Mylan, 5.4%; and Perrigo, at 4.4%.


Finally, Duffy said generics are often overlooked by investors despite the fact that so many economic and political trends are in their favor.

"Right now the highest overlap with any other ETF is roughly about 30% so it really does round out that pharmaceutical sector exposure that people may want in their portfolios," said Duffy.

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