The ALPS Medical Breakthroughs ETF (NYSEARCA:SBIO), my choice for the InvestorPlace Best ETFs for 2018 competition, is enduring its worst quarter of 2018. With just a few trading days left in the third quarter, SBIO is sporting a quarter-to-date loss of 0.2%.
Part of the problem is investors’ preference for large-cap biotechnology and healthcare fare. As of Sept. 21, the large-cap Nasdaq Biotechnology Index and S&P 500 Heath Care Index are up 7.1% and 13%, respectively.
On a year-to-date basis, SBIO still looks good, up 14.3%, or 310 basis points better than the Nasdaq Biotechnology Index. Year-to-date, SBIO is also outpacing the equal-weight S&P Biotechnology Select Industry Index.
There are just few trading days left in the third quarter, so lamenting SBIO’s laggard status for the quarter is not productive. Choices for investors currently involved with the SBIO ETF are clear. Take profits in the biotechnology exchange-traded fund and investigate other positions or stick with SBIO in anticipation of more upside.
Taking profits is never a bad thing, but with a slew of SBIO components developing potentially groundbreaking drugs and therapies, this biotech ETF can deliver more upside into year-end and beyond.
Ligand acquires and develops technologies used to develop new drugs and collects royalties on those technologies from companies that purchase from Ligand. That is working for Ligand, SBIO’s second-largest holding, as the stock is up nearly 90% year-to-date.
Also, a potential rebound candidate among SBIO holdings is Israel’s Taro Pharmaceutical Industries (NYSE:TARO). Shares of Taro are down more than 15% in third quarter after the company reported disappointing fiscal first-quarter results.
There is a chance that SBIO ekes out a small third-quarter gain or finishes the quarter flat thanks to a slew of healthcare conferences slated for late September. More than a dozen conferences around the world are scheduled for the next several days.
Loxo Oncology Inc. (NASDAQ:LOXO), SBIO’s fourth-largest holding, is expected to unveil Phase-1 trial data for its medullary thyroid cancer treatment this week, among other possible catalysts for SBIO holdings.
Another SBIO ETF component to keep an eye on is Omeros (NASDAQ:OMER).
Assording to the Omeros website:
“[Omeros] is commercial-stage biopharmaceutical company committed to discovering, developing, and commercializing small-molecule and protein therapeutics for large-market as well as orphan indications targeting inflammation, complement-mediated diseases and disorders of the central nervous system The company, which is 0.79% of SBIO’s weight, has a product on the market, but the story here is OMS721, Omreos’ immunoglobulin A (IgA) nephropathy treatment.”
In early October, Omeros is presenting at the Cantor Global Healthcare Conference in New York. That could be an opportunity for the company to update investors on its Phase 1 trial for the phosphodiesterase 7 (PDE7) addiction treatment.
The Bottom Line on the SBIO ETF
Looming healthcare conferences and trial updates coupled with the tendency of biotech stocks to deliver strong gains in the latter stages of the fourth quarter position SBIO to maintain its best ETFs status through year-end.