With that in mind, here’s a look at three biotech stocks that I think are well positioned to outperform in the new year. PBE offers exposure to companies that have the potential to achieve technological breakthroughs fueled by increased investment in medical processes. PBE is part of the suite of Dynamic ETFs from PowerShares that use quant-based screening to identify companies. There are 10 biotech ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). When buying individual stocks, you’re pinning all your hopes on the success of one company.
- When it does, these biotechnology start-ups soar – but when it doesn’t, they tend to drop like rocks.
- That’s owed to the company’s ability to consistently put up great numbers.
- Since the ETF’s inception in 2006, it has achieved an average annual total return of about 13%.
- Under the terms of this deal, XOMA received $31 million in upfront payments (including a $5 million equity investment) plus potential milestone payments and tiered royalties on future sales of gevokizumab.
- This ETF claims the best performance of the three since inception, achieving an average annual return of 17.52%.
- Its current top positions include Exact Sciences, Pacific Biosciences of California (PACB 3.66%), Ionis Pharmaceuticals (IONS 5.38%), Teladoc Health (TDOC -1.45%), and CareDx (CDNA 2.04%).
Each company in the index that the fund tracks has at least one drug in a Phase II or Phase III clinical trial. The passive management of the fund means it’s the cheapest of the funds on our list. Its expense ratio of 0.35% is equivalent to $3.50 for every $1,000 invested.
Understanding biotech ETF holdings
Brian Feroldi owns shares of Celgene and Regeneron Pharmaceuticals. Follow him on Twitter where he goes by the handle @BrianFeroldi or connect with him https://bigbostrade.com/ on LinkedIn to see more articles like this. While it’s still too early to tell if Nuplazid will be a hit, the early signs are quite encouraging.
- If you are interested in this specific corner of biotech, IDNA offers a way to do so without picking individual stocks.
- In 2021, the sector experienced significant volatility, with the index ultimately falling below 4,600 from its high point of nearly 5,500.
- Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.
- According to the legislation, the US national insurer could potentially negotiate the prices for up to 10 drugs by 2026, and this number could increase to 60 by 2029.
The fund invests in the stocks of companies that incorporate genomics into their businesses. It concentrates on gene-editing stocks, molecular diagnostics stocks, virtual care stocks, and the stocks of companies developing targeted therapeutics. In June, the FDA granted orphan-drug designation to ganaxolone as a treatment for CDKL5 Disorder, a rare genetic type of epilepsy. The company announced on Aug. 25 that it was licensing anti-IL-1 beta antibody gevokizumab to Novartis. Under the terms of this deal, XOMA received $31 million in upfront payments (including a $5 million equity investment) plus potential milestone payments and tiered royalties on future sales of gevokizumab. While Sangamo made solid progress from the outset of the year, an update in May lit a fire beneath the stock.
The best pharma ETFs also provide exposure to industries like biotechnology, clinical trials, and immunotherapy. The ETFs have been ranked in ascending order of their 5-year performance. Its top holdings include Amgen, Gilead Sciences, Vertex Pharmaceuticals (VRTX -0.19%), Moderna, and Iqvia Holdings (IQV 0.67%). The Ark Genomic Revolution ETF (ARKG -0.13%) is one of several exchange-traded funds operated by Cathie Wood’s Ark Invest.
Sales blew past analysts’ expectations in its first full quarter on the market, which hints that there is a lot of pent-up demand for the drug. Biotech giant Celgene (CELG) may be down from its 2015 high, but it has held up much better than its large-cap peers. That’s owed to the company’s ability to consistently put up great numbers. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page.
ARK Genomic Revolution Multi-Sector ETF (ARCA:ARKG)
But some investors might be better off interacting with the industry through biotech ETFs instead. Top holdings include Celgene, Biogen, Amgen, and Gilead Sciences. Because the ETF includes several large biotechs that pay dividends, its 0.46% yield ranks as the highest of these three top biotech ETFs.
There’s one big downside to investing in biotech stocks, though. The good news is that you can lower your risk level and portfolio volatility by investing in exchange-traded funds (ETFs) that focus on the biotech sector instead of buying individual biotech stocks. The SPDR S&P Biotech ETF (XBI 0.38%) seeks to track the S&P Biotechnology Select Industry Index. The index uses a modified equal weighting, which means the percentage of total assets for each stock owned is roughly the same.
The stock posted solid gains throughout most of 2017, but really took off in November. Nektar announced positive clinical results in November for two pipeline candidates — mu-opioid receptor agonist NKTR-181 and cancer drug NKTR-214. Since then, the fund has generated an annualized total return of about 15%.
The fund has more than $6 billion in assets, so investors need not worry about liquidity. Its top holdings include Madrigal Pharmaceuticals (MDGL -4.39%), Exact Sciences (EXAS -1.48%), TG Therapeutics (TGTX 0.85%), and Acadia Pharmaceuticals (ACAD -3.65%). However, because of its modified equal weighting, none of the largest positions in the ETF make up a significantly greater percentage of assets than other stocks. Celgene recently provided investors with a sneak peak at its fourth-quarter results that suggest that trend remains intact.
Several industry developments have kept biotech in the spotlight. A major theme this year is the move to incorporate artificial intelligence [AI] and automation in drug discovery. Companies are using AI to model protein structures and predict their immune response in potential treatments. We can draw a connection from BBH’s index strategy to its relative outperformance in recent years.
The biotech expects to begin a pivotal clinical study of ganaxolone in treating CDKL5 Disorder next year. Marinus should also report results from a couple of phase 2 studies of the drug in 2018, one in treating postpartum depression and the other in treating refractory status epilepticus. Companies in this broad-based sector can produce healthy returns. On the nft stocks to buy other hand, ETFs trade on public exchanges just like individual stocks. The biotech expects to begin a pivotal clinical study of ganaxolone in treating CDKL5 Disorder next year. Marinus should also report results from a couple of phase 2 studies of the drug in 2018, one in treating postpartum depression and the other in treating refractory status epilepticus.
However, over the short term, biotechnology hasn’t performed as well. In 2021, the sector experienced significant volatility, with the index ultimately falling below 4,600 from its high point of nearly 5,500. The fund charges an expense ratio of 0.47%, equivalent to $4.70 for every $1,000 invested.
First Trust NYSE Arca Biotechnology Index Fund (FBT)
If Nuplazid can ultimately snag a label expansion claim in one of these other disease states, then its peak sales could get big in a hurry. First, Regeneron and Sanofi will hear from the FDA in March about their new eczema drug candidate, Dupixent. This drug is believed to hold blockbuster potential, so an approval would go a long way toward rebuilding investor confidence. Second, the FDA has recently cleared Sanofi’s facility in France that caused the initial rejection of sarilumab. Finally, Eylea continues to put up impressive growth numbers in the U.S. and abroad, which bodes well for the company’s near-term earnings growth.
BBH passively tracks the “MVIS US Listed Biotech 25 Index” composed of companies involved in the development, production, marketing, and sales of drugs based on genetic analysis. Companies eligible for inclusion must derive at least 50% of their revenue from biotech-related activities. Specialized providers of diagnostic equipment are also included. The fund charges an expense ratio of 0.50%, equivalent to $5 for every $1,000 invested. However, it has just $165 million under management, which is the smallest amount of any fund on this list.
Specifically, documents from Invesco state PBE is built “by thoroughly evaluating companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value.” As with so many other investments, it’s worth remembering that past performance in this biotech ETF is not a guarantee of future returns. With a short list of stocks, there is more risk for things to go south if just one or two components roll over. But, as you can see from recent gains, when things go well, the investors in BBH can really cash in.
What is the BBH ETF?
On Sept. 20, the company reported positive results from a late-stage study of RNAi drug patisiran in patients with hereditary ATTR amyloidosis with polyneuropathy. A few weeks after the Novartis announcement, XOMA earned a $3 million milestone payment from a 2015 licensing arrangement with Nanotherapeutics for an experimental anti-botulism drug. While Acadia is a high-risk bet since it’s still burning through capital, the company looks well positioned to surprise to the upside in 2017. With shares down 37% from their all-time high, it’s a fine time to consider getting in. Looking ahead, 2017 promises to be a banner year for the company.
ETFvest lists 19 biotech ETFs that are currently available to investors in some form or another. Of these, a majority are broad biotech ETFs and four are leveraged. Other biotech ETFs are more niche and focus on specific health issues or specific treatment approaches. The ARK Genomic Revolution Multi-Sector ETF came into existence on October 31, 2014, and tracks 45 holdings. This ETF follows companies that develop products such as CRISPR technology, bioinformatics, molecular diagnostics and stem cells.
For investors looking for less volatility compared to stocks, here’s an overview of the five largest biotechnology ETFs for consideration. The future of biotech is likely going in the direction of more personalized medicine. With advancements in gene editing and CRISPR diagnostics, the idea here is to make medicines to each patient’s specific needs. There are also significant opportunities for biotech in orphan drugs to treat rare diseases, with several companies pursuing potential therapeutic candidates.
This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. We believe everyone should be able to make financial decisions with confidence. There’s clearly a lot of risk in this biotech ETF because of the structural components behind its makeup, as well as its unique and focused strategy just on cancer-related therapies. But if you think this is the area where there’s the most potential, CNCR could be worth a look.
A few weeks after the Novartis announcement, XOMA earned a $3 million milestone payment from a 2015 licensing arrangement with Nanotherapeutics for an experimental anti-botulism drug. In October, XOMA announced three additional licensing deals for its phage display libraries for antibody discovery. And on Dec. 7, the biotech reported that it had licensed XOMA 358, an experimental drug targeting treatment of hypoglycemia, to small drugmaker Rezolute. Its current top positions include Exact Sciences, Pacific Biosciences of California (PACB 3.66%), Ionis Pharmaceuticals (IONS 5.38%), Teladoc Health (TDOC -1.45%), and CareDx (CDNA 2.04%). Since its inception in 2001, the ETF has delivered an average annualized total return of 6.6%. Over the past five years, it has generated an annualized total return of about 4.5%.
Instead, it invests in businesses that are “focused on and are expected to substantially benefit from extending and enhancing the quality of human and other life” through genomics. This means the fund is concentrated on health care, information technology, materials, and energy businesses. In June, the FDA granted orphan-drug designation to ganaxolone as a treatment for CDKL5 Disorder, a rare genetic type of epilepsy. Marinus announced top-line data from its phase 2 study of the drug in September. On Dec. 13, Marinus was added to the Nasdaq Biotechnology Index, which meant that several exchange-traded funds were buying the company’s shares. The company announced on Aug. 25 that it was licensing anti-IL-1 beta antibody gevokizumab to Novartis.
