The groundbreaking research being done in this industry has the potential to change the world. But strict governing regulations may put a damper on company profits and impact investor returns.<\/p>
Biotechnology is the research and application of biomolecular processes. These processes are used to create products and technologies designed to help improve our quality of life and support the planet. How? By helping us combat disease, improve the environment, harness clean energy, enhance food production and devise more efficient manufacturing processes.<\/p>
Each time you take an antibiotic, drink a glass of wine or admire the newest designer dog breed on social media, you\u2019re encountering biotechnology at work.<\/p>
Biotechnology stocks are stocks from companies that research and produce biotech products, like pharmaceutical drugs, vaccines, biofuels, genetically modified plants, biocatalysts and more.<\/p>
Many biotech products \u2014 like pharmaceuticals \u2014 are a necessity. And staples like these have proven their capacity to weather down markets.<\/p>
For example, in the first three months of 2020, the S&P 500 dropped by a sizable 26.7%, while the iShares Nasdaq Biotechnology Index ETF \u2014 a fund that tracks US biotech and pharmaceutical companies \u2014 only lost 15.6%. And in the past year, the same fund has outperformed the S&P 500\u2019s 10.5% return with a 31.6% return of its own.<\/p>
The COVID-19 pandemic caused many markets to tank. But stocks in companies looking for effective COVID-19 treatments and vaccines have received increased interest \u2014 at least for now. This is just one example of the down market resilience of the biotech industry.<\/p>
Biotech stocks can help balance your portfolio during an economic downturn while providing the opportunity for investors to back groundbreaking technology \u2014 technology with the potential to drastically alter and improve our way of life. Biotechnology can and has changed the world \u2014 and investors can lend a hand in the process.<\/p>
The primary risk factor for biotech investors is the long, arduous and costly process of bringing a concept through research and development to a consumer-ready product.<\/p>
Many companies in this industry rely on approval from the Health Canada or the U.S. Food and Drug Administration (FDA), and the process can take years. There\u2019s no guarantee that a drug in development will reach pharmacy shelves or that a new industrial pesticide will be cleared for public use. Some biotech companies funnel funds into projects that span years with nothing to show for it.<\/p>
The recent scramble for a COVID-19 cure demonstrates the potential instability of a biotech investment. As dozens of companies rush to develop a viable vaccine, stocks in this sector are seeing a volatility surge as investors queue to back the right racehorse. But only one can win \u2014 and once a vaccine is approved, the other companies fighting to be first may see a drop in share prices.<\/p>
Investors must be willing to wait months or years for biotech stock investments to pan out. And even then, there\u2019s no guarantee of return.<\/p>
From startups with high hopes to well-established international corporations, there are a number of options for investors interested in purchasing biotech stocks.<\/p>
Some do. For example, Amgen (NASDAQ: AMGN), CVS Health (NYSE: CVS) and Novartis (NYSE: NVS) all pay dividends to shareholders. As of the time of writing, Spectral Medical (TSX:EDT), Helix BioPharma (TSX:HBP.TO) and Medicenna Therapeutics (TSX:MDNA) do not pay dividends.<\/p>
What are dividends and how do they work?<\/a><\/p> For a less targeted and more diverse approach to biotech investing, consider any of the following exchange-traded funds.<\/p> As of the time of writing, no. To invest in biotechnology ETFs, you have to access stock exchanges outside Canada like the NASDAQ or NYSE in the US. There are several Canadian-based brokerages that offer access to international exchanges on which biotechnology ETFs trade including Interactive Brokers<\/a> and Questrade<\/a>.<\/p> Alternatively, you can also buy stocks in biotechnology companies that trade on Canadian stock exchanges like Helix BioPharma (TSX:HBP.TO) and Aptose Biosciences (TSX:APS).<\/p>What ETFs track the biotech category?<\/h3>
Are there any biotechnology ETFs that trade on Canadian stock exchanges?<\/h4>
Compare trading platforms to buy biotech stocks<\/h3>