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Top-Performing Biotech ETFs YTD

Sweta Jaiswal, FRM

The biotech sector has been going strong since the start of 2019. In fact, the Nasdaq Biotechnology Index has returned 6.3% year to date. Let’s see what’s working in favor of biotech during a time when most sectors are struggling with trade issues (read: Biotech ETFs in Focus on Impressive Q2 Earnings Results).

Biggest M&A Deal on Track

Amgen AMGN recently agreed to buy psoriasis and psoriatic arthritis drug Otezla from Celgene CELG for $13.4 billion in cash. The deal is expected to close by 2019-end. Moreover, its successful completion can pave the way for one of the biotech industry’s largest deal of the past decade — Bristol-Myers Squibb’s BMY proposed acquisition of Celgene Corp for $74 billion in a cash-and-stock deal. In this regard, investors should know that U.S. regulators had raised antitrust concerns over this proposed acquisition following which Celgene started looking for a buyer for the Otezla drug (read: Amgen to Buy Celgene's Otezla: 5 ETF Drugs).

Meanwhile, Gilead Sciences GILD recently closed a global research and development collaboration agreement with Galapagos NV GLPG. The agreement, which was signed on Jul 14, received clearance from the FTC under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and merger control approval from the Austrian Federal Competition Authority. Per the agreement, the closure leads to an upfront license fee payment of $3.95 billion by Gilead to Galapagos.

Regulatory Tidings

Companies within the biotech sector gain majorly from positive pipeline-related advancements. Of late, the space has seen a series of such developments. To begin with, Alexion recently announced that the European Commission EC approved label expansion of lead drug, Soliris.  The drug is now approved for the treatment of neuromyelitis optica spectrum disorder in adult patients who are anti-aquaporin-4 antibody-positive with a relapsing course of the disease.

Moreover, Roche Holdings AG RHHBY recently announced the receipt of EC approval for its immuno-oncology drug Tecentriq in combination with Celgene’s chemotherapy drug Abraxane for the treatment of adult patients with unresectable locally advanced/metastatic triple-negative breast cancer whose tumors express PD-L1, having not received a prior chemotherapy for metastatic disease.

AI Applications Gaining Popularity

The application of AI and cloud-based technologies as well as enhanced R&D focus has lent a competitive edge to companies in the biotech space. The use of AI has began to revolutionize research activities in the industry as it can drastically reduce time and costs involved in developing life-saving drugs. For instance, Illumina ILMN released an open source AI software for discovering overlooked noncoding mutations in patients with rare genetic diseases at beginning of 2019.

Trump’s Drug Pricing Rule Gets Blocked

The Trump administration recently faced a setback in its effort to lower prescription drug prices. In July 2019, a federal judge overturned an administrative ruling requiring drug manufacturers to reveal list prices of medicines in television commercials. This benefited biotech companies as the imposition of the rule would have resulted in additional costs.

Biotech ETFs in Focus

The trends have been benefiting biotech ETFs. Here we highlight certain ETFs that have gained more than 10% year to date:

ARK Genomic Revolution Multi-Sector ETF ARKG—up 31.1% year to date

This is an actively managed ETF, focusing on the companies, likely to benefit from the extension and enhancement of the quality of human and other life by incorporating technological and scientific developments plus improvements and advancements in genomics into their business. The fund holds 39 stocks in its basket and has 0.75% in expense ratio. It has accumulated $428.1 million in its asset base (read: 5 Sector ETFs That Beat the Market in the First Half).

ALPS Medical Breakthroughs ETF SBIO — up 22.3%

This fund provides exposure to 77 companies with one or more drugs in Phase II or Phase III FDA clinical trials by tracking the S-Network Medical Breakthroughs Index. The product charges 50 basis points in fees per year from investors. It has AUM of $179.1 million in its asset base (read: Pfizer-Array Biopharma Deal Bump Up Biotech ETFs).

Principal Healthcare Innovators Index ETF BTEC — up 17.7%

This fund offers access to early-phase companies developing treatments for conditions like migraines, Crohn’s disease, multiple Sclerosis, diabetes, and other illnesses by tracking the Nasdaq Healthcare Innovators Index. It holds 191 stocks in its basket. BTEC charges 42 bps in annual fees. The product has accumulated $53.6 million in its asset base (read: Why These Innovative Biotech ETFs Are Soaring).

SPDR S&P Biotech ETF XBI — up 12%

The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 118 securities in its basket. Its AUM is $3.92 billion and expense ratio is 0.35%.

VanEck Vectors Biotech ETF BBH — up 11.1%

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. Its AUM is $344.6 million and expense ratio is 0.35% (read: AbbVie to Buy Allergan: Prescribed ETFs).

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Roche Holding AG (RHHBY) : Free Stock Analysis Report
Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
SPDR S&P Biotech ETF (XBI): ETF Research Reports
Principal Healthcare Innovators Index ETF (BTEC): ETF Research Reports
VanEck Vectors Biotech ETF (BBH): ETF Research Reports
ALPS Medical Breakthroughs ETF (SBIO): ETF Research Reports
Illumina, Inc. (ILMN) : Free Stock Analysis Report
Celgene Corporation (CELG) : Free Stock Analysis Report
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
Galapagos NV (GLPG) : Free Stock Analysis Report
Amgen Inc. (AMGN) : Free Stock Analysis Report
Ecopetrol S.A. (EC) : Free Stock Analysis Report
ARK Genomic Revolution ETF (ARKG): ETF Research Reports
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