The healthcare sector is disappointing this year. And the ICE Biotechnology Index is even more of a dud on a year-to-date basis. As things stand today, that biotech benchmark is poised for a second consecutive annual loss. It hasn’t posted a notable annual rise since the COVID-19 vaccine go-go days of 2020.
That now lengthy slump by biotech stocks and exchange traded funds could be a motivating factor for many investors to gloss over these assets. Conversely, now may be a good time to evaluate ETFs such as the WisdomTree BioRevolution Fund (WDNA ).
WDNA, which follows the WisdomTree BioRevolution Index, could prove to have multiple tailwinds for risk-tolerant investors. For example, the disruptive nature of the biotech industry hasn’t waned simply because equity performance has. Second, the slump experienced by biotech stocks has created a favorable valuation scenario — a rarity in the biotech arena.
Examining Biotech WDNA ETF Catalysts
WDNA holdings are engaged in a variety of high-growth healthcare segments, including some with exposure to immune-oncology (IO), which is shaping up to be one of the most lucrative corners of the sector. Forecasts indicate bullishness on IO stocks could be warranted.
“Based on 19 tumor types and 11 companies/partnerships, we estimate worldwide oncology sales to reach ~$271B. There is room for upside from additional tumor types such as gastric, pancreatic, and other heme malignancies. Positive outcomes for individual trials, and particularly for novel mechanisms, will likely be significant catalysts for multiple stocks,” according to TD Cowen research.
Good news: WDNA investors won’t be subjected to lofty valuations as a price of admission for accessing the ETF’s attractive growth prospects. In fact, some of the most undervalued stocks in the Morningstar US Biotechnology Index are WDNA holdings. That group includes CRISPR Therapeutics (CRSP) and Intellia Therapeutics (NTLA).
While CRISPR Therapeutics currently has no approved drugs, it does sport a robust early-stage pipeline of therapies that could be treatments for an array of genetic diseases. Likewise, Intellia has exposure to the high-octane genomics market.
“We think the company’s proprietary technology has the potential to build blockbusters in rare diseases. Intellia is focused on developing and commercializing novel therapies to treat severe, genetic diseases and currently possesses a sizable, yet mostly early-stage pipeline,” noted Morningstar analyst Rachel Elfman. “We think the company has the funding and technological capabilities to potentially bring several of its pipeline programs to market.”
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