Biotechnology is comprised of a broad range of companies that develop drugs and diagnostic compounds for the treatment of diseases and medical conditions. These products must go through a rigorous, costly, and time-consuming testing process before potentially obtaining approval from the U.S. Food and Drug Administration (FDA). This means it can often be a long time until investors see if the development of a particular drug will pay off. The group includes small start-up companies that focus on single drugs as well as large, well-established corporations that generate dozens of potential new drugs each year. The largest biotechnology stocks in the world include Amgen Inc. (AMGN), Gilead Sciences Inc. (GILD), and Vertex Pharmaceuticals Inc. (VRTX). In the trailing 12-month period, the biotechnology sector has underperformed relative to the S&P 500, with the iShares Nasdaq Biotechnology ETF (IBB) returning 12.9%1 compared to 27.3% for the S&P 5002.
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