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Top-Performing Biotech ETFs Amid the Coronavirus Crisis

Sweta Jaiswal, FRM
·4 mins read

The biotechnology sector has kept its promise of returns so far. The S&P Biotechnology Select Industry Index has returned 15.7% in the year-to-date period in comparison to the S&P 500’s 3.6% rise. From vaccine-related positive news to progress in the development of cell therapies for addressing coronavirus, all kept the sector surging.

Notably, the race to introduce vaccine and treatment of coronavirus is opening up opportunities, making the biotech sector a prospective space for investments. Recently, J&J became the fourth company to join the vaccine developers already in the Phase 3 clinical trials. The other companies to have already started the Phase 3 clinical trials are Pfizer (PFE)/BioNTech (BNTX), AstraZeneca (AZN)/Oxford University and Moderna (MRNA), all testing two shots of their respective candidates.

However, the sector is dealing with uncertainty regarding the introduction of the coronavirus vaccine. Going by sources, President Trump’s administration is believed to be building pressure on getting a vaccine approved before the elections in November. Meanwhile, the FDA has expressed intentions of not compromising with the vaccine’s quality, safety and efficacy standards when it comes to its decision of approval.

Meanwhile, Dr. Anthony Fauci, leading infectious disease expert, has commented that COVID-19 vaccinations could "very likely" begin in November or December, per a CNN report.

We must not forget here the pledge taken by leading vaccine developers to restore the faith of public in the vaccine development process in a situation when these companies are facing immense pressure to release the vaccine early. The companies that signed the pledge included AstraZeneca, Johnson & Johnson, Merck (MRCK), Moderna and Novavax (NVAX) along with those which are working in collaboration -- Pfizer and BioNTech, and Sanofi (SNY) and GlaxoSmithKline.

On the coronavirus treatment front, Regeneron (REGN) is one of the leading biotech companies along with Gilead Sciences (GILD) and Moderna (MRNA), among others, that is working on antibodies and vaccines for the treatment of coronavirus. Regeneron recently announced encouraging first data from a descriptive analysis of a phase I/II/III trial of REGN-COV2, which showed that the candidate reduced viral load and the time to alleviate symptoms in non-hospitalized patients suffering from COVID-19. REGN-COV2 also showed positive trends in reducing medical visits.

Increasing mergers and acquisition (M&A) deals continue to work in favor of the biotech market. Gilead Sciences (GILD) has agreed to buy cancer treatment specialist Immunomedics (IMMU) for $21 billion. Per the terms of the deal, Gilead will pay $88 per share to Immunomedics in an all-cash transaction by issuing a tender offer. The price per share represents a 108% premium over IMMU’s closing price of $42.25 as of Sep 11. The deal will be funded with $15 billion in cash on hand and roughly $6 billion in newly-issued debt.

Top Performing Biotech ETFs YTD

Here, we discuss a few ETFs that might gain on increased optimism in the coronavirus vaccine and treatment development:

ARK Genomic Revolution ETF ARKG — up 91.7% year to date

This is an actively-managed fund. Companies within ARKG are focused on and are expected to substantially benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments and advancements in genomics into their business. It has AUM of $2.29 billion and an expense ratio of 0.75% (read: Top & Flop ETF Zones Of First Nine Months Of 2020).

SPDR S&P Biotech ETF XBI — up 17.5%

The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It has AUM of $5.20 billion and an expense ratio of 0.35% (read: Biotech ETFs in Focus as the COVID-19 Vaccine Race Intensifies).

VanEck Vectors Biotech ETF BBH — up 15.2%

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. Its AUM is $484.9 million and it has an expense ratio of 0.35%.

iShares Nasdaq Biotechnology ETF IBB — up 11.9%

This fund seeks to provide exposure to U.S. biotechnology and pharmaceutical stocks and tracks the Nasdaq Biotechnology Index. The fund has an AUM of $8.95 billion, with an expense ratio of 0.46%.

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iShares Nasdaq Biotechnology ETF (IBB): ETF Research Reports
SPDR SP Biotech ETF (XBI): ETF Research Reports
VanEck Vectors Biotech ETF (BBH): ETF Research Reports
ARK Genomic Revolution ETF (ARKG): ETF Research Reports
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