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It was a terrific week to have money invested in the healthcare sector as the majority of the largest exchange-traded funds that focus on the space smashed the returns of the S&P 500. Several of these ETFs gained more than 2% during the trading week, but that was nothing compared to the top performing fund -- the PowerShares Dynamic Pharmaceuticals ETF (PJP 0.39%) -- as it roared 3.7% higher during the period.
So lets take a closer look at this ETF to figure out why it outperform this week.
PJP key statistics
| Inception Year | 2005 |
| Number of Holdings | 23 |
| Net Assets | $1,227 million |
| Average P/E Ratio | 27.12 |
| Yield | 0.56% |
| Expense Ratio | 0.56% |
DATA SOURCE: INVESCO.
As it name suggests, the PowerShares Dynamic Pharmaceuticals ETF invests the bulk of its assets in pharmaceutical companies. The PJP is also quite concentrated as it only holds a position in 23 different companies.
While that fact may worry some investors the fund does keep its assets in the biggest players in the space, which helps keep the funds overall risk profile down. In fact, the average market cap held in this fund right now is a whopping $70 billion.
Here's a look at the funds top 10.
| Company | Symbol | % Assets |
|---|---|---|
| Gilead Sciences | GILD | 5.36% |
| Bristol-Myers Squibb | BMY | 5.26% |
| Merck & Co. | MRK | 5.19% |
| Amgen | AMGN | 5.12% |
| Pfizer | PFE | 5.10% |
| Johnson & Johnson | JNJ | 4.97% |
| Ligand Pharmaceuticals | LGND | 4.96% |
| Eli Lilly & Co | LLY | 4.90% |
| Heron Therapeutics | HRTX | 4.59% |
| Novavax | NVAX | 4.41% |
DATA SOURCE: INVESCO.
What worked this week?
While every single one of this fund's top holdings finished the week in the green higher the entire fund was pulled up by the outperformance of one stock this week -- Heron Therapeutics (HRTX 3.75%).
Heron Therapeutics stock rocketed higher this week after the company announced that there are no longer any remaining substantive deficiencies in its New Drug Application for Sustol, its drug that is currently pending approval for chemotherapy-induced nausea and vomiting, or CINV.
That news likely relieved many of Heron's investors as the approval process for Sustol has been much more arduous than many had hoped for. The FDA has already rejected the drug twice and the agency has already extending their review of the drug. That has weighed greatly on Heron's stock over the past few quarters, so traders reacted favorably to the good news. The company is currently in discussions with the FDA about the drug's labeling.
Some analysts are projected that Sustol's peak sales could reach $400 million, but that estimate assumes that the drug's labeling is not overly restrictive. If the agency decides decide to greatly restrict the addressable market for Sustol than that estimate could fall rapidly.
What's next for the PJP?
This is the third time this year that the PJP has claimed the title of best performing weekly healthcare ETF, which hints that the funds has found a winning strategy. Given that it provides investors with instant diversity at a modest cost I think this could be a great choice for anyone who wants a little bit more healthcare exposure in their portfolio.
