Loncar Investments has announced the launch of the Loncar China BioPharma ETF (CHNA US) on Nasdaq Exchange.
The fund provides exposure to firms globally with significant exposure to China’s biopharmaceutical industry.
The fund tracks the Loncar China BioPharma Index, a niche index that covers equities of firms operating in China’s rapidly developing biopharmaceutical industry.
It has brought to market in partnership with white-label ETF platform Exchange Traded Concepts.
According to Loncar, the underlying strategy benefits from several tailwinds. These include reforms to the China National Drug Administration (CNDA) that are bringing the regulator up to global standards and rising standards of living putting innovative medicines within reach of more patients.
The firm also notes that the Chinese government has specifically targeted pharmaceuticals as an innovative industry to support through its “Made in China 2025” program.
“China aims to become a leader in global medicine,” said Brad Loncar, Chief Executive Officer of Loncar Investments. “Regulatory reform and a new rule allowing pre-revenue biotech companies to list on the Hong Kong Stock Exchange may signal a new era for innovative drug development in the region. We think this is an important trend in healthcare, as it has the potential to spur growth and benefit patients worldwide.”
“We are proud to deliver another cutting-edge, biotech-focused product to the market,” added J. Garrett Stevens, CEO of Exchange Traded Concepts. “China’s goal of moving its life sciences industry towards innovation is one of the most exciting themes within biotechnology, and the Loncar China BioPharma ETF gives investors a front row seat to this transformation.”
With a focus on innovators, the underlying reference index contains pharmaceutical companies, biotech companies, drug manufacturers, diagnostics companies, wholesalers, distributors, and service providers listed globally that play a strategic role in growing China’s drug industry.
It currently consists of 28 companies, 22 of which are listed on the Hong Kong Stock Exchange and six of which are listed on Nasdaq.
The index uses a modified equal-weighting methodology which purports to capture both the significant potential of China’s overall biopharma industry and the entrepreneurial spirit of innovators transforming it today.
Companies with a market cap greater than $10 billion collectively account for approximately 45% of the total index weight; those between $1bn and $10bn make up around a third; and those under $1bn take the rest. Rebalancing and reconstitution occur on a semi-annual basis.
The fund comes with an expense ratio of 0.79%. Its closest competitor is perhaps the KraneShares MSCI All China Health Care Index ETF (KURE US) which has some $30 million in AUM and is slightly more expensive with an expense ratio of 0.82%. KURE targets the same theme as CHNA but invests in companies listed on HKEX and mainland China only.
CHNA is Loncar’s second ETF. Its first outing – the Loncar Cancer Immunotherapy ETF (CNCR US) – is also focused on the biotechnology sector. This fund tracks an equally weighted index that consists of US firms engaged in research and development of therapies that treat cancer through the body’s immune system. CNCR was launched in October 2015 and has an expense ratio of 0.79%. It has accumulated $55m in assets.