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As cash-strapped biotech companies see their cash reserves dwindle, it has forced a number of companies to close up shop. The struggles faced in the sector highlights the benefits of getting exposure to it through biotech ETFs.

The number of publicly-traded U.S. biotech companies has diminished by 25% since 2007, writes Brett Chase for Minyanville. The Biotechnology Industry Organization reported that of the 131 companies that had enough cash to fund a year’s worth of operations, 10 were acquired and 19 closed down. The other 102 are still around because of layoffs, private funding, secondary offerings and licensing early-stage experimental drugs.

Acquisitions of biotech companies dropped to 38 last year and 21 so far this year, reports Rob Waters for Bloomberg. Since August 2009, 13 biotech companies went public, but 12 of those companies have watched their share prices drop. The Nasdaq Biotechnology Index is up around 7.5% so far this year, but gains are attributed to biotech prices that spiked on news of potential takeovers.

The biotech sector is a notoriously difficult one in which to single-stock pick because the success or failure of most companies in it depends on just one discovery. ETFs can be an ideal way to get exposure to the entire sector and diversify the risks of investing in it.

According to the ETF Analyzer, there are several ways to play this sector, including:

  • iShares Nasdaq Biotechnology ETF (NASDAQ:IBB)
  • SPDR S&P Biotech ETF (NYSEARCA:XBI)
  • First Trust NYSE Arca Biotech ETF (NYSEARCA:FBT)
  • PowerShares Dynamic Biotech ETF (NYSEARCA:PBE)
Max Chen contributed to this article.

Disclosure: None

Source: Biotech ETFs: The Better Way to Play