News that the Food & Drug Administration has approved
Arena Pharmaceuticals' (NASDAQ:
) weight-loss pill Lorcaserin is proving to be a boon for some
biotech ETFs. Lorcaserin becomes the first anti-obesity treatment
approved for sale in the U.S. in 13 years. Wednesday's drug
approval headlines have lit a fire under the biotech sector.
With a market capitalization of around $1.6 billion preceding
Wednesday's news, Arena entered the day as a small-cap company by
definition. That means its weight in an ETF that focuses
primarily on large-cap biotech names such as the iShares Nasdaq
Biotechnology Index Fund (NASDAQ:
) is small.
However, despite the fact that Arena accounts for less than
0.6 percent of IBB's weight, the ETF has printed a new 52-week
high and looks poised to easily eclipse its three-month average
daily volume of roughly 560,000 shares.
IBB is also getting a lift because it features a 0.91 percent
allocation to Vivus (NASDAQ:
), which is making a competing product to Locraserin. The FDA is
scheduled to rule on Vivus' Qnexa on July 17. California-based
Orexigen Therapeutics (NASDAQ:
), in conjunction with Japan-based Takeda Pharmaceutical, is also
working on a weight-loss treatment. Orex previously agreed to a
two-year study on Contrave's heart risks
Orex accounts for around 0.11 percent of IBB's weight. The
SPDR S&P Biotech ETF (NYSE:
) is benefiting even more than IBB on the back of the Arena news.
Arena is XBI's second-largest holding. XBI, which is up 3 percent
on heavy volume, allocates 3.44 percent of its weight to the
company. XBI is up around 33 percent year-to-date compared to an
approximate 24.2 percent gain for IBB.
Vivus and Orex were up around 6 percent and 13 percent,
respectively, for Wednesday's trading session.
Other biotech ETFs include the Market Vectors Biotech ETF
), the First Trust NYSE Arca Biotech Index Fund (NYSE:
), the PowerShares Dynamic Pharmaceuticals Portfolio (NYSE:
) and the PowerShares Dynamic Biotech & Genome Portfolio
For more on biotech ETFs, please click
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