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Moderna Turns Red Hot: Biotech ETFs to Bet On

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Moderna Inc. (MRNA - Free Report) has become the hottest stock in the biotech space as it is at the forefront in developing vaccines for the novel coronavirus disease. The biotech company began its phase 3 clinical trial called the COVE (Coronavirus Efficacy) study of a coronavirus vaccine on Jul 27 in collaboration with the National Institute of Allergy and Infectious Diseases.

The trial will be conducted on 30,000 participants, who will receive a 100 microgram dose of the investigational vaccine, across nearly 100 sites in the United States. Moderna remains on track to be able to deliver roughly 500 million doses per year, up to a potential of 1 billion beginning in 2021 (read: Late-Stage Coronavirus Vaccine Trials Begin: Biotech ETFs to Gain).

As the late-stage trial started, Moderna received an extra boost of $472 million from the U.S. government's Operation Warp Speed program. This is an addition to the earlier commitment of $483 million to support late-stage development of its mRNA vaccine candidate against COVID-19.

The phase 2 trial, which was completed in early July, showed that the mRNA-1273 vaccination elicits a robust immune response across all dose levels as it produced neutralizing antibodies in all 45 patients. The phase 1 trial study was released in March, which revealed that the vaccine had generated immune responses in eight patients.

The stock skyrocketed 245% since it announced its COVID-19 vaccine candidate mRNA-1273 on Feb 10. The solid run is likely to continue as most of the analysts are optimistic on the stock, citing that the potential vaccine can generate billions in sales if it is approved. Additionally, the stock as joined the NASDAQ 100 Index on Jul 20, replacing the CoStar Group (read: Expect Further Rally in Nasdaq-100 ETFs as Moderna Joins).

Solid Fundamentals

The Zacks Consensus Estimate for 2021 for earnings has been revised upward to $1.90 per share from a loss of $1.31 per share over the past 90 days. This suggests robust year-over-year growth of 233.1%. Revenues are expected see substantial growth from $282.3 million to $5.88 billion for next year. For this year, earnings and revenues are estimated to grow 8.4% and 368.9%, respectively.

Further, Moderna currently carries a Zacks Rank #2 (Buy) and belongs to the top-ranked Zacks industry (top 36%), suggesting strong upside for the stock over the coming days.

ETFs to Buy

Given the bullish fundamentals, investors seeking to tap this biotech firm could consider the following ETFs. These funds are the potential movers in the coming months:

ETFMG Treatments Testing and Advancements ETF (GERM - Free Report)

This fund offers direct exposure to the biotech companies directly engaged in the testing and treatments of infectious diseases by tracking the Prime Treatments, Testing and Advancements Index. It holds 57 stocks in its basket with Moderna occupying the second spot at 5.9% share. The ETF has amassed $71.5 million in its asset base within one and a half month of debut and charges 68 bps in annual fees (read: 3 New Coronavirus-Themed ETFs to Hog Attention in 2H).

Principal Healthcare Innovators Index ETF (BTEC - Free Report)

This fund invests in companies that are leading the charge toward innovative solutions, rather than spending money on marketing and distribution by tracking the Nasdaq Healthcare Innovators Index. It holds 206 stocks in its basket with Moderna taking the top spot at 5.3% allocation. BTEC charges 42 bps in annual fees and has accumulated $103.9 million in its asset base. It has a Zacks ETF Rank #3 (Hold).

VanEck Vectors Biotech ETF (BBH - Free Report)

This fund offers exposure to 24 companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment by tracking the MVIS US Listed Biotech 25 Index. Moderna is among the top 10 holdings accounting for 4.7% in the portfolio. BBH has amassed $530 million in its asset base and charges 35 basis points in fees per year. It has a Zacks ETF Rank #3 with a High risk outlook.

iShares Genomics Immunology and Healthcare ETF (IDNA - Free Report)

This ETF follows the NYSE FactSet Global Genomics and Immuno Biopharma Index, which offers exposure to developed and emerging market companies that could benefit from long-term growth and innovation in genomics, immunology and bioengineering. Holding 47 stocks in its basket, Moderna takes the top spot with 5.1% of assets. The fund has $140.8 million in AUM and charges 47 bps in annual fees (read: COVID-19 Vaccine Push Brings Hope: Stock & ETF Beneficiaries).

Other ETFs

Some of the other popular ETFs like iShares NASDAQ Biotechnology ETF (IBB - Free Report) , SPDR S&P Biotech ETF (XBI - Free Report) , VanEck Vectors Biotech ETF (BBH - Free Report) and Loncar Cancer Immunotherapy ETF (CNCR - Free Report) also have significant allocations to Moderna.

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