By definition, biotechnology is a field of science that draws on the biological sciences such as microbiology, molecular biology and genetics. Many investments in this sector are measured against the NASDAQ Biotechnology Index. This index is comprised of companies listed on the NASDAQ and are classified as either biotech or pharmaceutical firms. The index is calculated under a modified capitalization-weighted methodology.
Investing in this sector can be risky and is most appropriate for growth-oriented investors with a long time horizon. The risks of loss of principal and volatility may be offset as “The potential for strong growth from new products for unmet medical needs, good pipelines, increasing profitability, and consolidation points to an exciting future for the biotechnology industry.” ~Rajiv Kaul.
To gain a better understanding of what a biotech firm looks like, here are a few that belong to the aforementioned index. This is not a recommendation to buy and is intended solely as educational material.
Amgen, Inc. (AMGN) – discovers, develops, manufactures, and delivers human therapeutics based on advanced in cellular and molecular biology.
Vertex Pharmaceuticals, Inc. (VRTX) – development and commercialization of small molecular drugs for the treatment of serious diseases worldwide.
Exelixis, Inc. (EXEL) – engages in the discovery, development, and commercialization of drugs for the treatment of cancer, metabolic, and cardiovascular disorders.
Jazz Pharmaceuticals (JAZZ) – a specialty pharmaceutical company that develops products for neurology and psychiatry in the U.S.
Each sector in the investment universe tells a compelling story and I can’t help but to be fascinated by the advancements in biotechnology. Please keep in mind that because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Until next week,
Susan R. Linkous
“Susan On Money”
Securities offered through LPL Financial
Member FINRA and SIPC