Van Eck Global has launched the Market Vectors Generic Drugs ETF (NASDAQ: GNRX), the first and only Exchange-Traded Fund (ETF) to target global manufacturers of generic drugs and biosimilars, similar copies of existing but difficult to replicate biological drugs.
“With rising health care costs, drug manufacturing innovation, and public support for less expensive options to brand name drugs, this is a compelling ETF,” said Edward Lopez, Marketing Director with Van Eck. “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.”
According to the Generic Pharmaceutical Association (GPhA), 88 percent of the drugs dispensed in the U.S. 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. “However, until now, there had not been an ETF that offered targeted exposure to the generic drug space.”
Expiring patents on various brand name drugs and the development of biosimilars are among the main factors driving returns in the generic pharmaceuticals space. Significant investment in research and development is still required, which reduces competition, but time to market can be quicker than brand name drugs, allowing companies to price their drugs at a significant discount.
As a percentage of drugs distributed globally, spending on generics is expected to increase from 40 percent in 2013 to 46 percent in 2018.1 “With much of that expected growth coming from emerging markets, we believe having global exposure is essential,” continued Mr. 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.”
GNRX seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Indxx Global Generics & New Pharma Index (the “Index”). To be included in the Index, companies must derive a significant proportion of their revenues (or have the potential to derive a significant proportion of their revenues) from the generic drug industry or have a primary business focus on the generic drug industry. Constituents must also meet market capitalization, daily trading volume, and daily trading activity requirements.
As of December 31st, 39 percent of the constituents in GNRX’s underlying index were domiciled in the United States, with India, Israel, South Korea and Japan, having the next largest country weightings, respectively. Approximately 76 percent of the Index’s constituents were large cap companies, those with market caps of more than $6 billion, while 24 percent were mid-caps (market caps between $1.5 billion and $6 billion).
Van Eck notes that an investment in GNRX incurs risks which include those associated with investments in the pharmaceutical and biotechnology sectors as well as foreign and emerging markets investments, particularly those concentrated in India and Ireland.
GNRX has a gross expense ratio of 0.63 percent and net expense ratio of 0.55 percent, which is capped contractually until February 1, 20172. GNRX joins Van Eck Global’s family of healthcare-focused industry ETFs, which also includes Market Vectors Biotech ETF (NYSE Arca: BBH) and Market Vectors Pharmaceutical ETF (NYSE Arca: PPH).
About Van Eck Global
Founded in 1955, Van Eck Associates Corporation was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today the firm continues this tradition by offering innovative, actively managed investment portfolios in hard assets, emerging markets, precious metals including gold, fixed income, and other alternative asset classes. Market Vectors exchange-traded products have been sponsored by Van Eck since 2006 when the firm launched the nation’s first gold-mining ETF. Today, Market Vectors ETFs and ETNs span several asset classes, including equities, fixed income (municipal and international bonds) and currency markets. Market Vectors is one of the largest ETP families in the U.S and worldwide. Van Eck also offers mutual funds, insurance trust funds, separate accounts and alternative investments. Designed for investors seeking innovative choices for portfolio diversification, Van Eck’s investment products are often categorized in asset classes having returns with generally low correlations to those of more traditional U.S. equity and fixed income investments.
The Fund is subject to risks, which include those associated with investments in the pharmaceutical and biotechnology sectors, including development, procurement and/or marketing of drugs, the development, protection, and exploitation of intellectual property rights, patent expiration, and regulatory scrutiny and approval, which may adversely affect the Fund or Fund trading. Foreign and emerging markets investments, particularly those concentrated in India and Ireland, are subject to risks, which include changes in economic and political conditions, foreign regulations, and currency exchange rates, unstable governments, and limited trading capacity, which may make these investments volatile in price or difficult to trade. Non-diversified funds such as those concentrated in companies of smaller capitalization or certain sectors may also be subject to elevated risks.
Indxx Global Generics & New Pharma Index (the “Index”) is the exclusive property of Indxx, LLC. Indxx, LLC uses its best efforts to ensure that the Index is calculated correctly. Indxx, LLC has no obligation to point out errors in the Index to third parties. Market Vectors Generic Drugs ETF is not sponsored, endorsed, sold or promoted by Indxx, LLC and Indxx, LLC makes no representation regarding the advisability of investing in Market Vectors Generic Drugs ETF. Investors cannot invest directly in the index.
Fund shares are not individually redeemable and will be issued and redeemed at their “Net Asset Value” (NAV) only through certain authorized broker-dealers in large, specified blocks of shares called creation units and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.826.2333 or visit marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.
|1||Source: IMS Health|
|2||Cap excludes certain expense, such as interest|
Mike MacMillan/Chris Sullivan