Biotech sector has witnessed new investment opportunities amid the pandemic as a race was triggered to introduce vaccines and treatment options. Moreover, increasing mergers and acquisition (M&A) deals, growing AI dominance and favorable regulatory tidings continue to work in favor of the biotech market.
Going on, the full FDA approval for COVID-19 vaccines to certain developers has been increasing the confidence for imposing vaccine mandates. Also, the unvaccinated population is now increasingly getting inclined to opt for vaccinations. Now, the nod for booster shots is also enhancing people’s confidence in vaccination. It has boosted demand for coronavirus vaccines and improved the company’s financials.
Let’s take a look at some big biotechnological earnings releases to see if these will impact ETFs exposed to the space.
Earnings in Focus
On Feb 7,
Amgen
AMGN
reported fourth-quarter 2021 earnings of $4.36 per share, surpassing the Zacks Consensus Estimate of $4.14. Earnings increased 26% year over year, largely due to improved revenues and decreased share count. Total revenues of $6.85 billion in the quarter lagged the Zacks Consensus Estimate of $6.91 billion. However, total revenues were up 3% year over year largely buoyed by increased Other Revenue from the
Eli Lilly
(LLY) collaboration, which offset the decrease in product sales.
Amgen issued the financial guidance range for 2022. It expects revenues in the $25.4 to $26.5 billion range. The adjusted earnings per share guidance for 2022 is pegged at $17.00 to $18.00.
On Feb 1,
Gilead Sciences
GILD
reported earnings of 69 cents per share for the December-end quarter, down from $2.19 in the year-ago quarter. The figure lagged the Zacks Consensus Estimate of $1.53 per share. Total revenues of $7.2 billion outpaced the Zacks Consensus Estimate of $6.6 billion but were down 2% from the year-ago quarter, mainly due to falling demand for Veklury (remdesivir 100 mg for injection) for the treatment of COVID-19.
The company has issued guidance for 2022. Product sales are projected at $23.8-$24.3 billion. Total product sales, excluding Veklury, are expected to be $21.8–$22.3 billion. Total Veklury sales are estimated at around $2 billion, reflecting the recent surge in COVID-19 hospitalizations. Earnings per share are expected in the range of $6.20-$6.70.
On Feb 3,
Biogen
BIIB
reported fourth-quarter 2021 earnings per share of $3.39, which outpaced the Zacks Consensus Estimate of $3.32. In the year-ago quarter, Biogen had recorded a loss of $1.05 per share. Sales of the company totaled $2.73 billion, down 4% (both actual and constant currency basis) from the year-ago quarter, hurt by lower sales of Tecfidera and Spinraza. However, the metric surpassed the Zacks Consensus Estimate of $2.62 billion.
Biotech ETFs in Focus
We believe it is prudent to discuss a few ETFs with a relatively wider exposure to the companies discussed above in the current scenario.
iShares Biotechnology ETF
IBB
This fund seeks to track the investment results of an index composed of U.S.-listed equities in the biotechnology sector. It comprises 375 holdings, with the companies mentioned above taking about 21.5% of the fund. It has AUM of $8.53 billion and charges a fee of 45 basis points a year. IBB has lost about 2% since Feb 1 (as of Feb 8). The fund carries a Zacks ETF Rank #2 (Buy), with a High-risk outlook.
VanEck Biotech ETF
BBH
The underlying MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. It holds about 25 securities in its basket, with the concerned companies having 25.6% weight in the fund. Its AUM is $480.1 million and expense ratio is 0.35%. BBH has declined around 2.2% since Feb 1 (as of Feb 8). The fund currently carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook.
SPDR S&P Biotech ETF
XBI
The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 189 securities in its basket and puts some weight in-focus companies. Its AUM is $6.35 billion and expense ratio is 0.35%. XBI has lost around 2.1% since Feb 1 (as of Feb 8). The fund carries a Zacks ETF Rank #2, with a High-risk outlook.
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