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Moderna, Other Vaccine Developers Lead The Way In New GERM ETF

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Moderna, Other Vaccine Developers Lead The Way In New GERM ETF

Vaccines are all the rage these days, both in the medical and investment fields. Now, there's an exchange-traded fund for that.

What To Know: The ETFMG Treatments, Testing and Advancements ETF (NYSE: GERM) debuted Thursday, just as the U.S. is experiencing another uptick in coronavirus cases. GERM's 56 components include companies engaged in research and development, testing and development of therapeutics and vaccines.

GERM follows the Prime Treatments, Testing and Advancements Index, a basket of advancement, testing and treatment companies “designed to include the securities of companies engaged in performing research, development and commercialization of treatments, vaccines or biological testing for infectious diseases,” according to ETFMG.

Why It's Important: GERM comes to market as biotechnology exchange-traded funds are soaring due in large part to the fight against the coronavirus. The new ETF checks another box that's relevant in the current environment: a large weight to Moderna (NASDAQ: MRNA), one of the companies furthest along in developing a COVID-19 vaccine.

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GERM's utility isn't confined to the fight to vanquish COVID-19. In fact, that's not even the only pandemic the world is currently dealing with. There are currently 20 epidemics or pandemics various countries are tussling, according to ETFMG. From 2011 through January 2018, the U.S dealt with 36 various epidemics.

As is the case with other refined segments of the biotechnology market, human vaccines offer investors exponential compound annual growth rates.

“New reports indicate the value of the global human vaccines market is expected to grow to $72.5 billion by 2024, representing a CAGR of 11.2% from 2016 to 2024,” notes ETFMG.

What's Next: GERM's roughly 6% weight to Moderna stands out at a time when that stock is hot and the company is saying that its vaccine will be ready for distribution sometime next year. In the meantime, testing remains crucial to slowing the spread of the coronavirus, meaning GERM's nearly 32% weight to testing companies is relevant today and for the foreseeable future.

Other GERM top 10 holdings include Alnylam Pharmaceuticals (NASDAQ: ALNY), Bio-Rad Laboratories (NYSE: BIO) and Quest Diagnostics (NYSE: DGX).

As for competition, it often helps new thematic ETFs to be the first to market in their respective segments, but GERM could eventually have some competition in the form of the BioThreat ETF (VIRS), which Pacer Financial filed plans for earlier this year. Other issuers have filed plans for ETFs inspired by the coronavirus, but those offerings revolve around work from home and other non-vaccine trends.

 

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