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Biotech ETFs Rally as Illumina Tops Q2 Expectations

This article was originally published on ETFTrends.com.

Biotechnology sector ETFs were among the best performers Tuesday, with Illumina (ILMN) shares surging after the genomics firm beat second-quarter expectations and raised its year-end outlook.

Among the best performing ETFs of Tuesday, the Invesco Dynamic Biotech & Genome (PBE) increased 3.0%, ARK Genomic Revolution Multi-Sector ETF (ARKG) advanced 2.5% and iShares Nasdaq Biotechnology ETF (IBB) rose 2.0%.

Meanwhile, ILMN shares jumped 11.2% Monday. ILMN makes up 4.8% of PBE, 7.6% of ARKG and 5.2% of IBB.

Evercore analyst Ross Muken said in that the Illumina stock story is "far too compelling to ignore," reports Allison Gatlin for Investor's Business Daily.

"The breadth/scope of portfolio strength in this quarter was truly remarkable," Muken said in a report. "We haven't barely even scratched the surface on many areas driving the notable inflection (such as oncology)."

Illumina is a genomics firm that produces systems and non-reusable tools to sequence the genome to help researchers learn more about the genetic variations that sometimes lead to disease.

"It is quite an exciting time in genomics/sequencing," Muken added. "Kudos to management as well for the superb execution as it is one thing to have a sizable opportunity in front of you and another thing to make it a reality in the consistent fashion they have. The sum of all this makes (Illumina) challenging to not own despite the current growth tantrum."

Fueling the surge on Tuesday, Illumina revealed second quarter sales that were $42 million above expectations. The firm's service revenue was topped by 18% and sales of new-generation sequencing consumable tools came in ahead of forecasts by 4%.

Genomic sequencing is also becoming a booming business in the health care industry. Deutsche Bank analyst Dan Leonard noted robust growth in the quarter, with demand for consumable tools for sequencing rising 35% year over year, including $13 million of stocking orders from China. Even excluding stocking orders, a growth of 31% beat out expectations for 25% growth.

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