Cathie Wood is betting on a genomic revolution because she believes it will be the next big industry disrupting development. We believe Wood’s favorite stocks, Vertex Pharmaceuticals Incorporated (NASDAQ:) and Incyte Corporation (NASDAQ:), have attractive upside potential and are ideal investment bets now. Conversely, we think Wood’s investments in Fate Therapeutics, Inc. (NASDAQ:) and Twist Bioscience Corporation () may have a long journey before they can launch their products commercially. So, we believe they are best avoided now.Renowned investor and manager of the world’s largest actively traded ETF company Cathie Wood has been an advocate of the genomics industry for a long time. In a CNBC interview, Wood stated that she views a genomic revolution and fintech growth as two potential industry disruptive trends in 2021, following the electric vehicle (EV) industry boom last year. DNA sequencing has been making breakthrough progress in recent years and is expected to eventually lead to cures for virtually all critical diseases. In this regard, Wood said, “We’re going to be able to cure diseases that we never thought it would be possible to cure, including cancer.”
The biotech industry’s business resiliency and degree of medical innovation were revealed over the past year. Investors poured capital into pharmaceutical companies and biotech firms, which are now leveraging abundant capital funds and advanced technology to make significant progress on critical ailment treatments. Companies such as Vertex Pharmaceuticals Incorporated (VRTX) and Incyte Corporation (INCY) have been releasing positive data from clinical trials over the past couple of months, which is driving favorable revenue and earnings growth estimates. Given this backdrop, Wood’s Ark Genomic Revolution ETF (ARKG) has gained 133.4% over the past year, and 30.1% over the past six months.
While the biotech industry is expected to redefine healthcare standards over the long term, many companies have been making only minor, current advancements in the field. Consequently, it may take a long time for such companies to generate acceptable profits from their drug pipelines. This is because significant investment and technical prowess is required for these companies to develop their drug candidates for commercial use. While Wood has ample funding to hold such stocks until they deliver decent results, retail investors might not have that capacity. Thus, we think some companies held by ARKG, such as Fate Therapeutics, Inc. (FATE) and Twist Bioscience Corporation (TWST), which are currently operating in their preliminary research stages, are best avoided until they release verified data demonstrating progress on their respective drug developments.
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