Arena Approval Boosts Biotech ETFs (ARNA, IBB, XBI)

News that the Food & Drug Administration has approved Arena Pharmaceuticals' ARNA weight-loss pill Lorcaserin is proving to be a boon for some biotech ETFs. Lorcaserin becomes the first anti-obesity treatment approved for sale in the U.S. in 13 years. Wednesday's drug approval headlines have lit a fire under the biotech sector. With a market capitalization of around $1.6 billion preceding Wednesday's news, Arena entered the day as a small-cap company by definition. That means its weight in an ETF that focuses primarily on large-cap biotech names such as the iShares Nasdaq Biotechnology Index Fund IBB is small. However, despite the fact that Arena accounts for less than 0.6 percent of IBB's weight, the ETF has printed a new 52-week high and looks poised to easily eclipse its three-month average daily volume of roughly 560,000 shares. IBB is also getting a lift because it features a 0.91 percent allocation to Vivus VVUS, which is making a competing product to Locraserin. The FDA is scheduled to rule on Vivus' Qnexa on July 17. California-based Orexigen Therapeutics OREX, in conjunction with Japan-based Takeda Pharmaceutical, is also working on a weight-loss treatment. Orex previously agreed to a two-year study on Contrave's heart risks Bloomberg reported. Orex accounts for around 0.11 percent of IBB's weight. The SPDR S&P Biotech ETF XBI is benefiting even more than IBB on the back of the Arena news. Arena is XBI's second-largest holding. XBI, which is up 3 percent on heavy volume, allocates 3.44 percent of its weight to the company. XBI is up around 33 percent year-to-date compared to an approximate 24.2 percent gain for IBB. Vivus and Orex were up around 6 percent and 13 percent, respectively, for Wednesday's trading session. Other biotech ETFs include the Market Vectors Biotech ETF BBH, the First Trust NYSE Arca Biotech Index Fund FBT, the PowerShares Dynamic Pharmaceuticals Portfolio PJP and the PowerShares Dynamic Biotech & Genome Portfolio PBE. For more on biotech ETFs, please click here.