Market Vectors launches Generic Drugs ETF

Jan 26th, 2016 | By | Category: Equities

Market Vectors, the exchange-traded fund arm of asset manager Van Eck Global, has launched a new ETF that invests in firms engaged in the manufacture of generic drugs.

Market Vectors expands options for health care investors with Generic Drugs ETF launch

James Duffy, Product Manager with Van Eck.

The Market Vectors Generic Drugs ETF (Nasdaq: GNRX), which is listed on Nasdaq, offers global exposure to a realm of the health care sector that may exhibit lower volatility than traditional pharmaceuticals exposure. The ETF’s risk profile benefits from lower research and development costs by its constituents, as well as the stability of operating in markets where levels of demand for the seller’s products have been better established.

The main factors driving returns in the industry are the ability to generate suitable products with successful market timing, which coincides with the expiration of the parent drug’s patent. Research and development costs still apply, but companies may be able to more quickly realise profits due to shorter time-to-market periods. Due to lower research and development costs, firms may also be able to provide attractive pricing in their products, helping to acquire greater market share.

Edward Lopez, Marketing Director with Van Eck, said: “Our goal with any ETF is to help investors access opportunities presented by evolving global markets. GNRX allows investment in a major trend that has the potential to redefine the pharmaceutical industry. With rising health care costs, drug manufacturing innovation, and public support for less expensive options to brand name drugs, this is a compelling ETF”

The Market Vectors Generic Drugs ETF is a pioneer in the development of ETFs  specifically targeting the global generic drugs space. Although these firms do not capture the immense profits sometimes achieved by firms who invent the next blockbuster drug, the generic drugs market still represents a large, fast growing industry. According to the Generic Pharmaceutical Association, 88% of the drugs dispensed in the US are generics. “That is a large number and helps explain the rapid growth of manufacturers over the past several years,” said James Duffy, Product Manager with Van Eck.

Spending on generics is expected to increase from 40% in 2013 to 46% in 2018. “With much of that expected growth coming from emerging markets, we believe having global exposure is essential.” adds Duffy. “Whereas pharma-focused ETFs have typically concentrated on developed markets, GNRX’s global approach provides exposure to the full potential of the generic drugs industry.”

The Market Vectors Generic Drugs ETF tracks the performance of the Indxx Global Generics & New Pharma Index. As of 17 January 2016, the fund has investment exposure mainly in the US (41.1%), India (19.3%), Israel (8.6%), South Korea (7.0%) and Japan (6.0%). The fund has 84 constituents of which the top holdings are Actavis (8.7%), Teva Pharmaceuticals (8.6%), Sun Pharmaceuticals (5.8%), Baxalta (5.7%) and Mylan (5.1%). The fund has a net expense ratio of 0.55%.

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