The Biotech Industry has skyrocketed in 2012 as an increase in the number of new drug approvals has boosted investor optimism within the industry. The iShares Nasdaq Biotechnology Index Fund (IBB) and the SPDR S&P Biotech ETF (XBI) have both gained over 25 percent year-to-date.
“In 2011, the U.S. FDA approved 30 new drugs, compared to 21 in 2010,” S&P Capital IQ wrote in a note. “Through September 2012, the year-to-date total was 22. We see an improving trend for FDA first cycle review approvals and a rise in the rate of new drug approvals for rare diseases, which we think is helping to boost investor sentiment for the agency, after years of criticism stemming from inconsistency in making and communicating its decisions.”
Another key factor in the Biotech Industry’s success has been the “patent cliff” major pharmaceuticals have faced in 2012. Major drug manufacturers have looked to biotech companies to help offset major revenue losses from expiring patents as it is less time consuming than developing new drugs through in-house R&D.