A Fresh Approach to Biotech

For years, the biotech sector has called investors to it. Biotech companies offer the promise of returns many times over your initial investment, and seem to be unaffected by macro-economic events. However, when something seems too good to be true, that means it often is. For every succesfull biotech company, such as Genentech, Amgen, or Biogen Idec, there are many more Dendreons, Orexigens, and Amylins out there.

At Helix Investments, we like biotech, but do not like the risk and volatility unique to the sector. Biotech ETF's are the solution to this problem, because they spread out and diversify risk. We have selected the First Trust NYSE Arca Biotech Index Fund (FBT) as the best way to receive exposure to biotech. The fund contains 20 stocks, including the big 4 (Amgen, Gilead, Celgene, and Biogen Idec) and 16 other mid and small-cap biotechs. This mix, in our opinion, is the best way to receive some of the stability of the big 4 and the potential returns of other biotechs, such as Vertex and Alexion.

However, we do also have positions in 2 biotechs, Biogen Idec and Human Genome Sciences. We have selected these 2 for several reasons. Biogen Idec is the smallest of the big 4, meaning that it has far more growth than the others, but also retains some stability as being the 4th largest biotech company. In addition, Biogen is still small enough to be considered an acquisition target for one of the mega-cap pharma companies. Human Genome Sciences, on the other hand, has Benlysta, the first new lupus treatment in 50 years, something that we think will be very rewarding for long-term Human Genome shareholders. And the company may also be attractive to either GlaxoSmithKline, its Benlysta partner, or another pharmaceutical company.

Biotech investing, if done prudently, can be very rewarding, and here at Helix Investment Management, we believe that we have the right mix of risk and reward in the biotech sector.