Return of Swine Flu: Pharma ETFs In Focus

by on September 1, 2009 | ETFs Mentioned:

It’s baaaaaaaaack. Or maybe more accurately, swine flu never left.

The H1N1 virus, which has caused widespread concern on at least two occasions over the last year, is back in the headlines as many parts of the world begin to gear up for the traditional flu season. In recent days and weeks, we’ve seen a number of high profile indications that the deadly virus didn’t simply retreat into the distance:

  • Swine Flu Is Endemic In PigsColombian president Álvaro Uribe has been diagnosed with H1N1 after complaining of fever, headaches, and backaches during a meeting with regional leaders. Uribe’s diagnosis comes just weeks after Costa Rica’s president Oscar Arias recovered from a mild case of swine flu. Uribe is apparently being kept in semi-isolation as he continues to carry out his duties as Colombia’s leader.
  • In the sports world, U.S. soccer star Landon Donovan recently made headlines when he announced that he played in a World Cup qualifier in Mexico last month while battling swine flu.
  • In a recent report, the World Health Organization predicted that within two years nearly one-third of the world’s population will have contracted swine flu. The WHO is also predicting that many countries will see swine flu cases double every three to four days for several months until a peak transmission is reached.

There are reasons to both fear the worst and hope for the best.

Timing is becoming critical, as millions of doses of vaccine aren’t expected to be ready until October. If swine flu breaks out early in the flu season, many regions of the world could be unprepared to handle waves of sick patients. Unlike many diseases, swine flu spreads most quickly and strikes most viciously in young people (it is theorized that many older people have been exposed to similar diseases several years ago, and have since developed some degree of immunity). As children head back to school and universities welcome students back, classrooms become potential breeding grounds for disease.

On the bright side, winter is coming to a close in the southern hemisphere, and the wrath of H1N1 has been not nearly as bad as some health experts had feared. And the race to find and develop a vaccine is progressing. While swine flu hasn’t been in the minds of most Americans in recent months, many pharmaceutical companies have thought of nothing else over the past year. Beijing-based Sinovac Biotech Ltd. appears to be one of the leaders in the race to find a cure. The firm’s share price recently hit a record high in New York trading after announcing it could obtain a license to produce a swine flu vaccine within a week. Here in the U.S., eight sites chosen by the National Institute of Health are beginning to carry out tests of vaccines.

Health & Biotech ETFs In Focus

Between swine flu scares and proposals for national health care, the health and biotech sector has been in focus for the better part of the last year. As we prepare for the next chapter in the swine flu saga, here’s a look at tree ETFs keeping an eye on:

  • Merrill Lynch Pharmaceutical HOLDRS (PPH): This ETF invests exclusively in pharmaceutical companies, and maintains significant holdings in a few individual securities. Johnson & Johnson (24%), Pfizer (15%), and Merck (11%) combine to account for about half of PPH holdings. PPH has gained about 5% so far in 2009.


  • iShares S&P Global Healthcare Sector Index Fund (IXJ): With more than 80 individual components in a dozen countries, IXJ offers diversified exposure to the global healthcare industry. IXJ has an expense ratio of 0.48% and has gained about 4% year to date.


  • PowerShares Dynamic Pharmaceuticals (PJP): PJP is based on the Dynamic Pharmaceuticals Intellidex Index, which seeks to identify companies poised to experience capital appreciation through an analysis of various investment criteria. PJP has an expense ratio of 0.60% and has returned about 4% to date this year.


For a complete list of health and biotech ETFs, visit our Health & Biotech ETFdb Category page.

Disclosure: No positions at time of writing.