IDNA - IDNA: Thematic Biotechnology Index Fund Only Suitable For The Long Run

2023-06-07 12:34:24 ET

Summary

• Genomic revolution and pharmacogenomics have strong growth prospects that may enable the iShares Genomics Immunology and Healthcare ETF biotech portfolio to generate supernormal growth.
• In order to enable retail investors to benefit from this technological advancement in the field of DNA, investors can think of options like IDNA.
• Since its creation, IDNA’s price has more than doubled within a span of almost 39 months. However, since September 2022, price has been in a steady decline.
• The majority of IDNA’s holdings generated positive price growth during the past 1 year. However, the possibility of all the stocks delivering growth will take time.

~ by Snehasish Chaudhuri, MBA (Finance).

During my last coverage about a year back, I was cautiously optimistic about iShares Genomics Immunology and Healthcare ETF ( IDNA ). I mentioned that the overall price growth since the inception (almost three years back) of this fund had been quite impressive, considering the drastic impact of Covid-19 pandemic in the U.S. equity market. Although the portfolio of investments was expected to generate positive return in the medium term, IDNA seemed to be a better prospect only for long-term growth-seeking investors. I also had a feeling that there were strong possibilities of downward movements with every downward trend in the market. One year hence, I’d like to find out how this biotech fund has performed, and what are the future prospects for IDNA?

IDNA Has an Actively Managed Portfolio of a Small Pool of Biotech Stocks

iShares Genomics Immunology and Healthcare ETF primarily invests in biotechnology and pharmaceutical stocks. This healthcare exchange traded fund was launched by BlackRock, Inc. (BLK) and is managed by BlackRock Fund Advisors. It has an asset under management, or AUM, of $151.5 million.

This fund benchmarks the performance of its portfolio against the NYSE FactSet Global Genomics and Immuno Biopharma Index. This index is composed of developed and emerging market companies that could benefit from the long-term growth prospects present in the field of innovation in genomics, immunology, and bioengineering. IDNA doesn’t pay any dividend at present, and is currently trading at a marginal discount of 0.02 percent.

iShares Genomics Immunology and Healthcare ETF invests in public equity shares in all the major stock markets worldwide, with 61 percent investments in the U.S. stock market. 25 percent investments were in various developed European equity markets. This ETF has around 5 percent investments in the Japanese stock market and another 5 percent investments in Asian emerging markets. The fund is currently priced around $25 and has an expense ratio of 0.47 percent. Annual average total returns generated by IDNA during 2016 and 2021 was 25.15 percent, which is exceptionally good. The fund has a relatively high turnover ratio of 59 percent, implying that it is actively managed.

Why Should Investors Be Bullish on Pharmacogenomics Related Stocks

By combining pharmacology (the science of drugs) and genomics (the study of genes and their functions), pharmacogenomics studies how genes affect a person's response to drugs. Pharmacogenomics have immense potential in the treatment of cancer. It aims to develop effective and targeted medications at doses tailored to a person's genetic makeup. Targeted medications also strive to reduce possible adverse reactions to drugs. Wider usage of software analytics will allow scientists to link genomic sequences to pathological conditions, allowing them to focus their research on certain genetic diseases.

Pharmacogenomics thus have an important role in the prediction, prevention, and more precise diagnosis for pathologies and targeted treatments. Currently, the focus is on optimizing different types of cancer treatment depending on the genomes of individual cancer cells. Now-a-days examination can determine whether one carries a copy defective gene, which participates in cell repair in the body, and their level of risk of developing cancer. Pharmacogenomics can shed light on origins of diseases with more precision. More recently, genetics played an important role in the detection of the coronavirus and should be crucial in the fight against mutations as well.

Composition of IDNA’s Portfolio and its Performance Over the Past One Year

iShares Genomics Immunology and Healthcare ETF invested almost 80 percent of its assets only in 21 stocks namely Sanofi ( SNY ), Blueprint Medicines Corporation ( BPMC ), Takeda Pharmaceutical Company Limited ( TAK ), Roche Holding AG ( RHHBY ), BeiGene, Ltd. ( BGNE ), Exelixis, Inc. ( EXEL ), Regeneron Pharmaceuticals, Inc. ( REGN ), Genmab A/S ( GMAB ), CRISPR Therapeutics AG ( CRSP ), Vir Biotechnology, Inc. ( VIR ), Moderna, Inc. ( MRNA ), Beam Therapeutics Inc. ( BEAM ), Ginkgo Bioworks Holdings, Inc. ( DNA ), BioCryst Pharmaceuticals, Inc. ( BCRX ), BioNTech SE ( BNTX ), Intellia Therapeutics, Inc. ( NTLA ), Iovance Biotherapeutics, Inc. ( IOVA ), SpringWorks Therapeutics, Inc. ( SWTX ), Ligand Pharmaceuticals Incorporated ( LGND ), Xencor Inc. ( XNCR ) and Arcus Biosciences, Inc. ( RCUS ).

13 of these 21 stocks generated positive returns during the past one year. Some of these stocks have generated exceptionally high returns over that period. BGNE recorded a price growth of 56 percent, GMAB grew by 32 percent, TAK grew by 29 percent and REGN, SWTX & XNCR registered a price growth between 19 to 24 percent. At a time when the S&P 500 Index (SP500) registered a price growth of only 4 percent, returns of these biotechnology stocks are really commendable. Stocks like SNY, RHHBY, BGNE, EXEL, CRSP, VIR, MRNA, BEAM, and NTLA, though, did not perform that well. Over the long run, these stocks are bound to generate healthy returns for the growth-seeking investors of iShares Genomics Immunology and Healthcare ETF.

IDNA Always Had Been Suitable for Long-Term Growth Seeking Investors

During my last coverage, I opined that the iShares Genomics Immunology and Healthcare ETF can only be considered as a medium or long-term investment option. Genomic revolution has good growth prospects, which may enable these biotechnology stocks to generate supernormal growth. Scientists have started uncovering the real large-scale practical use of human genome sequencing. With so many biotechnology companies already developing therapies using conventional molecules, the question is the need for large scale genetics investment in the first place. In order to enable retail investors to benefit from this technological advancement in the field of DNA, investors can think of options like IDNA. Since its creation in June, 2019, IDNA’s price more than doubled within a span of almost 39 months. Price rose to an all time high of $55. 2 during September, 13, 2022.

However, since then the IDNA price has been in a steady decline, which was very much expected and mentioned in my last coverage. Price has come down to $24.3, which surely has wiped out a lot of the wealth of its investors. But, the good thing is, it apparently has reached its bottom, and the price can now move only (hopefully) in an upward direction.

Few of the biotechnology stocks that IDNA holds have started generating positive returns. However, despite their declines, the majority of IDNA’s holdings have generated positive price growth during the past twelve months. Besides, the biotechnology stocks listed in other equity markets have maintained good returns. The possibility of most of the stocks in IDNA's portfolio generating positive returns will take time, maybe another six to nine months. However, a course correction upward for iShares Genomics Immunology and Healthcare ETF seems very much on the cards.

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