|New Stock Indexes to Track Healthcare Trends|
|Saturday, 27 June 2009 17:06|
Below are new healthcare stock indexes I have created, revised, and tracked over the past few years which are now featured at a new website called Investars YOU. The new site includes automated index tracking and allows investors to create custom stock portfolios based on their individual preferences with the ability to invest real money by linking your brokerage account.
The Cosmetic and Restorative Medicine Index (CRM) tracks the performance of companies that derive over 50% of revenue from any of the following activities: (1) prescription skin care therapeutics; (2) medical devices, products, services, OR equipment for procedures which are intended to enhance appearance; (3) medical devices, products, services, OR equipment for use as joint replacements, tissue repair agents, tissue reconstruction agents, surgical adhesives, and cardiovascular procedures; and (4) regenerative medicine products, services, and/or an active clinical pipeline which seeks to restore or repair the functionality of lost or damaged organ, tissue, cellular, and genetic material.
The CRM Index is organized to include companies which either enhance appearance or restore bodily functions (with increased demand expected from an aging Baby Boomer population and as medical advances allow people to live longer) - including a breakdown of approximately 15% stem cells + regenerative medicine, 25% skin care + cosmetic medicine, 30% orthopedic repair + implants, and 30% cardiovascular repair + implants.
The Global Stem Cell Index tracks the performance of regenerative medicine companies (with stock prices of at least 15 cents at the time of inclusion) which derive over 50% of revenue or have compound(s) in active pre-clinical or clinical development which are designed to restore, replace, repair, or enhance the functionality or appearance of tissue and organ systems, including all types of embryonic and adult stem cell therapeutics. In addition, all types of products and services for stem cell banking are included in this index.
The Global Generic Drug Index tracks the performance of companies which meet any of the following three requirements: (1) derive either $500 million (USD) OR more than 50% of trailing 12-month revenues from the manufacture and sale of any type of generic (off-patent) prescription or over-the-counter (OTC) drug product intended for use by humans, including contract manufacturing services for drug products and biological agents; (2) have one or more compound(s) in active clinical development OR have a pending ANDA with the FDA for a generic drug candidate; (3) have received FDA approval for an abbreviated new drug application (ANDA) within the past 12 months.
Favorable growth trends for the generic drug industry include about $70 billion in brand name drug sales with patent expirations through 2012, a push to increase generic substitution rates from 65% of all prescriptions dispensed to over 70%, continued industry consolidation of small and mid-caps by industry leaders such as Teva Pharma (NASDAQ:TEVA) and Mylan Labs (NYSE:MYL), and news this past week that seven years is an appropriate time period to protect brand-name biotechnology medicines from cheaper generic rivals compared to industry groups which are lobbying for 12-14 years of marketing exclusivity as legislators debate a regulatory pathway for generic versions of biological agents.
The Global Tobacco Index tracks the performance of companies which derive over 50% of their revenue from the distribution or manufacturing of any type of tobacco product (e.g. cigarettes, cigars, chewing tobacco) or any related tobacco supplies (e.g. wrapping papers, tobacco leafs, filters). Last week, President Obama signed into law a measure giving the FDA regulatory authority over tobacco products and tobacco use represents a major cause of preventable deaths and healthcare costs in this country and around the world.
However, from an investment standpoint, companies such as Altria (NYSE:MO) with a dividend yield near 8% may actually benefit from the measure which effectively prevents new tobacco products from entering the market, restricts marketing, but falls short of allowing the outright ban of all tobacco products.
The Health Benefit Providers Index is passively managed to track the performance of retail pharmacies, pharmacy benefit managers, managed care companies, health insurers, hospital pharmacy operators, workers compensation insurers, and specialty health benefit providers. Companies in this index such as UnitedHealth (NYSE:UNH) and Aetna (NYSE:AET) have bounced off multi-year stock price lows on the prospect of less sweeping healthcare reform than originally feared, including the profit-less prospect of competing against a public, government-run healthcare plan.
The Global Health Information Technology (Health IT) Index tracks the performance of companies which derive the majority of their revenue from the following activities: (1) the electronic transmission, storage, and processing of prescriptions (e-prescribing); (2) electronic storage and systems for healthcare facility operations and medical records; and (3) electronic systems, devices, and services for remote, real-time monitoring of patient health parameters (telemedicine).
Despite uncertainties over the prospects for major healthcare reform, increased spending on Health IT is widely recognized as an important feature to modernize medical records, measure healthcare outcomes, and improve/extend the reach of modern healthcare technology through remote patient monitoring and other related technologies.
The Health IT index has easily outpaced the overall market on a year-to-date basis (YTD), including some top YTD stock price gainers from the index such as Allscripts-Misys (NASDAQ:MDRX) (+48.6%), Eclipsys (NASDAQ:ECLP) (+27.2%), Cerner (NASDAQ:CERN) (+60.2%), Computer Programs & Systems (NASDAQ:CPSI) (+42.3%), Quality Systems (NASDAQ:QSII) (+29.5%), Zix Corp (NASDAQ:ZIXI) (+52%), and Merge Healthcare (NASDAQ:MRGE) (+236%).
The Preventive Medicine Index passively tracks the performance of companies with market caps over $100 million at the time of inclusion that derive over either 50% or $100 million in trailing 12-month revenue from any of the following activities: (1) human vaccines which are already on the market or in active clinical development; (2) diagnostics and lab services; (3) diabetes care; and (4) vitamins, health supplements, functional foods, and weight loss products or services. Index components will be removed to reflect corporate events such as mergers and bankruptcies which result in de-listing of the underlying stocks.
An index of companies involved in diagnostics, lab services, diabetes care, and vaccines which have positive growth trends and represent M&A targets for big pharma companies, such as Pfizer's (NYSE:PFE) pending acquisition of Wyeth (NYSE:WYE) in which PFE cited Wyeth's high-growth vaccine + biological agent business as a major reason for the deal. Crucell (NASDAQ:CRXL) represents the largest pure-play vaccine maker with a market cap of $1.6B, and the stock has gained about 35% since I wrote about it in January as a possible takeover target.
The closely related Emerging Diagnostics Index tracks the performance of companies with market caps below $250 million at the time of inclusion. The index includes diabetes monitoring device makers, laboratory services, clinical diagnostics, diagnostic imaging, diagnostic equipment makers, and molecular diagnostics.
The Cancer Diagnostic & Therapeutic (Dx/Tx) Micro-Cap Index constituents reflect a cross-section of emerging cancer companies with market caps below $250 million at the inception date of 4/12/09, including (1) diagnostics (molecular diagnostics and device-based diagnostics), (2) lab services (personalized medicine applications to guide and track the effectiveness of cancer treatments), (3) drug discovery (screening and modifying compounds to achieve anti-cancer effects during the early stages of preclinical and Phase 1 clinical studies), (4) immunotherapy (a.k.a. cancer vaccines which are designed to stimulate the immune system to eradicate cancer), and (5) commercial or late-stage (Phase 2-3) clinical development.
A World Health Organization report released last year estimates that cancer will overtake heart disease as the top cause of death in the world by 2010, which is part of an overall trend that predicts global cancer cases and deaths will more than double by 2030. In addition to the urgent need for safer and more effective cancer treatments; advances in genetic testing and screening have the potential to diagnosis the disease at much earlier stages and can also be used to monitor and guide the treatment process.
The Regulatory Catalyst Index tracks the performance of healthcare companies with pending new drug, biological agent, or medical device product decisions at the FDA. The index is actively managed and derived from the BioMedReports.com FDA Calendar database.
Disclosure: No positions.