Claymore/Clear Global Vaccine ETF: Investing in Healthcare's Growth Sector

by: Andrew Corn

With the media talking about a global market pandemic, I want to take a moment to talk about risk management, in this case prevention of disease; specifically through the use of vaccines. As economists calculate the growing cost of healthcare on a global basis, it is immediately apparent that a dose of prevention costs far less than treatment.

The big healthcare companies already participate in both ends of these solutions. However, much of new drug and therapy discovery is performed by smaller more focused firms. The larger firms provide compliance processing, manufacturing, distribution, education and of course marketing. The long-term profit potential is distributed between firms of multiple sizes.

Why vaccines? Vaccines are an important and frequently overlooked component to disease prevention. Illuminating this concept reveals a potentially potent investment opportunity.

Vaccines stimulate the body’s immune system to produce antibodies that fight a form of the virus (that is the ultimate target) that is not harmful. Then, if the person is infected by the real virus, the body has been prepared to prevent and/or fight it.

Public health issues such as pandemics have changed the course of history several times. Vaccines have changed the way the modern world manages the risks of many diseases.. In the last 150 years we have virtually eliminated countless diseases in the industrialized world.

As numerous diseases are eradicated, new diseases, some with the threat of global pandemic have made headlines in the main stream media and are regularly discussed by politicians. With the integrated nature of the global economy and the speed and ease of international travel, new potential pandemics are more far-reaching and potentially spread faster than ever before.

The rise in threat of potential global epidemics has produced advances in preventive medicine. The vaccine field now is experiencing growing demand and a higher profile. We believe this is a long-term trend.

The threat of a potential global pandemic has been highlighted in recent years by such issues as avian flu and SARS outbreaks. Demand for flu vaccine has been significant, with many regions in the United States reporting shortages in recent years. In addition, concerns about bio-terrorism have raised the profile and need for vaccines. With the re-emergence of previously contained diseases, such as polio, additional future sources of demand for vaccines exist. Vaccines are moving from a privilege to a right in Africa, Asia and South America aiming to eradicate diseases such as polio, mumps and chicken pox, many of which are unheard of in Westernized countries.

New and evolving uses for vaccines are also contributing to growth. A vaccine for cervical cancer is in development which could have widespread applicability and possibly be a government mandate. The list of potential vaccines is growing.

Vaccines are also breaking news (click to read the headlines, warning an 8 meg .pdf) on the technology, biotech and pharmaceutical fronts. Today vaccines have the backing of billions of dollars in research and development aiming to defeat common diseases, to potentially preventing worldwide pandemics such as bird flu, West Nile disease and other infectious diseases.

The Investment Thesis

As every parent in the U.S. knows, vaccination is a requirement for all children entering school, public or private, grades K-12 and just as stringent rules apply to entering college or grad school. These requirements are now being adopted globally, and extend beyond academia.

Government mandates are not a new investment theme. Vaccines are far reaching, saving millions of lives every year and the investment goes far beyond government mandates to the discovery of vaccines for a host of applications.

Vaccines are a global issue with major corporations and banks, venture capital firms and non-profits forming unlikely alliances to finance and develop new vaccines and delivery methods to solve new problems. These range from AIDS, several types of Cancer and Alzheimer’s to preventing addictions and today even certain types of obesity.

Today, and for the foreseeable future, the research, production, distribution and delivery of vaccines is a global business with enormous backing. It is a history of successful therapies, and a world of need. It is comprised of global pharmaceutical companies and supported by dozens of specialty firms, some of which may grow to be the global firms of the future. During index design, Clear chose a modified market cap weighting system to prevent big pharmaceutical firms from dominating the index allowing a voice for smaller discovery and other types of firms that are material to the vaccine value chain.

The firms that research, develop, manufacture and provide wholesale distribution of vaccines may prosper faster than the overall market making it a very attractive investment area.

Disclaimer: Mr. Corn is CEO of Clear Indexes LLC which publishes the Clear Global Vaccine Chain Index. The index has been licensed to Claymore Securities, Inc who has issued the ETF: Claymore/Clear Global Vaccine Index (JNR).

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