Ebb & Flow
NASDAQ's revamped biotechnology index takes effect today, although many purists may find that "biotech" has been diluted in the new NBI.
In the past, NASDAQ used the SEC's Standard Industrial Classification (SIC) system, which was created in 1971 and has not kept up with the dynamics of the technology sectors, according to John Jacobs, NASDAQ's executive vice president of worldwide marketing and financial products. Under the SIC system, a company "self-declares" the sector in which it belongs, and many biotechs selected broader categories such as "Pharma" and thus were not considered for the NBI.
The process resulted in NASDAQ having to evaluate on its own whether companies should be considered based on something other than their SIC codes.
The revamped index is based on the London Stock Exchange's FTSE Global Classification System, which contains biotechnology and pharmaceutical sub-sectors. Using FTSE, Jacobs said the selection process will be more transparent for both companies and investors. "We don't want to sit behind closed doors to decide who gets in and who doesn't. We want investors to be able to clearly track the companies who will get in," he said.
Once a stock meets the FTSE requirements, it then must meet other NBI eligibility criteria, including: listing on the NASDAQ National Market; and meeting minimum requirements for market value (at least $200 million) and average daily share volume (at least 100,000 shares; for dual-listed companies, NASDAQ counts only the NASDAQ volume).
The net result is that 55 companies were added to the index, bringing the total to 129. Of the 55, at least six have a generics component. Another two are CROs. NASDAQ does not have a limit to the number of companies in the NBI. "If you meet the criteria, you should be in the index," said Jacobs.
No company fell