Oncology treatment has witnessed remarkable progress due to the relentless efforts of pharmaceutical companies in recent times. Pharma companies have invested heavily in research, clinical trials, and technology, resulting in improved survival rates and enhanced quality of life for cancer patients.
And here is not end. With more growth in the cards, the investment opportunity has significantly expanded over the past decade due to a substantial risein the number of newly listed oncology companies. Moreover, nearly 25% of small biotech trade below net cash value, per Tema ETFs.
As a result, Tema ETFs has launched a pureplay Oncology ETF, namely Tema Oncology ETF (CANC) on Aug 15, 2023. Let’s delve a little deeper.
Inside the Fund
The fund looks to provide long-term growth by investing in companies operating in the oncology industry. It holds 48 stocks in total. No stock takes about more than 4.97% of the fund. Regeneron Pharmaceuticals (4.97%), Merck & Co (4.72%) and Novartis AG (4.47%) are he top three stocks of the fund. The net expense ratio of the fund is 0.75%. United States (67.59%) takes the top spot as far as geographical weights are concerned, followed by Switzerland (6.39%) and Japan (6.37%).
How Does It Fit In a Portfolio?
The oncology treatment market has been experiencing significant growth due to various factors like rising incidence of the disease, advancements in treatment modalities, personalized medicines, investments in research and developments, rise of immunotherapy, growing healthcare infrastructure in emerging markets and collaboration between pharmaceutical companies and research institutions. Oncology spending is forecast to nearly double by 2027.
According to Precedence Research, the global oncology market is expected to drive growth at a CAGR of 8.8% from 2023 to 2032. There is 100% increase in number of new drugs approved for oncology in the year 2021, per Tema ETFs. Oncology spending is forecast to grow materially across all types of cancers. Oncology, more than the rest of biotech, increasingly involves novel trial design.
Competition
Investors already have a pureplay cancer ETF at their disposal, namely Range Cancer Therapeutics ETF CNCR. The underlying index of the fund – the Range Cancer Therapeutics Index – tracks the performance of a portfolio of U.S. exchange-listed pharmaceutical or biotechnology stocks or American Depositary Receipts with a market capitalization of more than $250 million.
It charges (79 bps in fees) slightly higher than CANC. However, CNCR has lower company-specific concentration risks than CANC as no stock accounts for more than 1.64% of the former fund. Still, CNCR failed to amass investor interest as it has only $9.5 million in assets despite having entered the market in 2015. From this point of view, we can say that the newbie CANC should not face much pureplay competition.
With respect to big pharma competition, CANC may see ETFs like VanEck Pharmaceutical ETF PPH, iShares U.S. Pharmaceuticals ETF IHE and Invesco Dynamic Pharmaceuticals ETF PJP posing threats for business.
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Range Cancer Therapeutics ETF (CNCR): ETF Research Reports
Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
VanEck Pharmaceutical ETF (PPH): ETF Research Reports
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