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How Will Biotech ETFs React to These Q3 Earnings Release?
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The coronavirus outbreak is worsening in the United States and globally, with the number of infected cases increasing by the day. Thus, any positive news highlighting the progress of vaccine developers or antibody manufacturers is expected to create great returns for investors.
According to a WHO report, more than 150 potential coronavirus vaccine candidates are being currently developed whereas, only 11 experimental candidates have reached the late-stage human trials, per the sources. Notably, the two main front-runners in the coronavirus vaccine development, Moderna (MRNA) and Pfizer (PFE)/BioNTech, are steadily moving toward releasing data from their large, late-stage trial in November, according to sources. In fact, Moderna recently mentioned that it is actively preparing for the launch of its coronavirus vaccine candidate.
Meanwhile, the other two prominent vaccine developers, AstraZeneca (AZN), working in collaboration with the Oxford University, and Johnson & Johnson (JNJ), have received a green signal from the FDA to resume their late-stage coronavirus vaccine trials in the United States. Notably, these companies paused trials after a trial participant showed some serious health issue which required a thorough review of their safety data.
Let’s take a look at some big biotechnological earnings releases to see if these will impact ETFs exposed to the space.
Earnings in Focus
On Oct 28, Amgen (AMGN - Free Report) reported third-quarter 2020 earnings of $4.37 per share, which surpassed the Zacks Consensus Estimate of $3.75. Earnings increased 19% year over year, largely on the back of higher revenues. Total revenues of $6.42 billion in the quarter outpaced the Zacks Consensus Estimate of $6.38 billion. Moreover, total revenues increased 12% year over year.
Amgen narrowed its revenue guidance range from $25.0-$25.6 billion to $25.1-$25.5 billion. Adjusted earnings per share guidance was raised from a range of $15.10 to $15.75 to $15.80 to $16.15 per share.
On Oct 28, Gilead Sciences (GILD - Free Report) reported earnings of $2.11 per share in the September-end quarter, up from $1.64 in the year-ago quarter and surpassed the Zacks Consensus Estimate of $1.83. Total revenues of $6.60 billion surpassed the Zacks Consensus Estimate of $6.20 billion and rose 17% from the year-ago period. Growing sales from Veklury largely supported the upside during the quarter.
Gilead lowered its annual guidance. Product sales are now projected to be $23-$23.5 billion versus the previous guidance of $23-$25 billion. Earnings per share are expected to be $6.25-$6.60 in comparison to the earlier guidance of $6.25-$7.65.
On Oct 21, Biogen (BIIB - Free Report) reported third-quarter 2020 earnings per share of $8.84, which surpassed the Zacks Consensus Estimate of $8.06. Earnings slid 4% year over year on lower revenues. Sales of the company totaled $3.38 billion, down 6% from the year-ago quarter. Sales, however, marginally surpassed the Zacks Consensus Estimate of $3.35 billion. The company’s top-lined saw softer sales of multiple sclerosis drug Tecfidera and spinal muscular atrophy drug, Spinraza.
On Oct 29, Alexion Pharmaceuticals posted third-quarter adjusted earnings of $3.24 per share, which rose from the year-ago quarter’s $2.79. Earnings also outpaced the Zacks Consensus Estimate of $2.59. Revenues were up 26% year over year to $1.59 billion and outpaced the Zacks Consensus Estimate of $1.42 billion on higher sales of Soliris, Ultomiris and Strensiq.
Alexion updated the guidance. It raised the total revenues and adjusted earnings per share guidance and slashed the operating margin outlook.
Biotech ETFs in Focus
In the current scenario, we believe it is prudent to discuss a few ETFs which have a relatively wider exposure to the companies discussed.
This fund seeks to provide exposure to U.S. biotechnology stocks and tracks the Nasdaq Biotechnology Index. It comprises 203 holdings with the above-mentioned companies taking about 21.2% of the fund. It has AUM of $8.88 billion and charges a fee of 46 basis points a year. IBB has lost 2.8% since Oct 20 (as of Nov 4). The fund carries a Zacks ETF Rank #2 (Buy), with a High-risk outlook (read: Moderna Expects COVID-19 Vaccine Data in November: ETFs to Gain).
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 24 securities in its basket, with the concerned companies having 31% weight in the fund. Its AUM is $458 million and expense ratio is 0.35%. BBH has lost 3.3% since Oct 20 (as of Nov 4). The fund currently carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook (see all Health Care ETFs here).
The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 139 securities in its basket and puts some weight in-focus companies. Its AUM is $5.31 billion and expense ratio is 0.35%. XBI has lost 0.8% since Oct 20 (as of Nov 4). The fund carries a Zacks ETF Rank #2, with a High-risk outlook (read: Trump vs. Biden: ETF Strategies for the Election Outcome).
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How Will Biotech ETFs React to These Q3 Earnings Release?
The coronavirus outbreak is worsening in the United States and globally, with the number of infected cases increasing by the day. Thus, any positive news highlighting the progress of vaccine developers or antibody manufacturers is expected to create great returns for investors.
According to a WHO report, more than 150 potential coronavirus vaccine candidates are being currently developed whereas, only 11 experimental candidates have reached the late-stage human trials, per the sources. Notably, the two main front-runners in the coronavirus vaccine development, Moderna (MRNA) and Pfizer (PFE)/BioNTech, are steadily moving toward releasing data from their large, late-stage trial in November, according to sources. In fact, Moderna recently mentioned that it is actively preparing for the launch of its coronavirus vaccine candidate.
Meanwhile, the other two prominent vaccine developers, AstraZeneca (AZN), working in collaboration with the Oxford University, and Johnson & Johnson (JNJ), have received a green signal from the FDA to resume their late-stage coronavirus vaccine trials in the United States. Notably, these companies paused trials after a trial participant showed some serious health issue which required a thorough review of their safety data.
Let’s take a look at some big biotechnological earnings releases to see if these will impact ETFs exposed to the space.
Earnings in Focus
On Oct 28, Amgen (AMGN - Free Report) reported third-quarter 2020 earnings of $4.37 per share, which surpassed the Zacks Consensus Estimate of $3.75. Earnings increased 19% year over year, largely on the back of higher revenues. Total revenues of $6.42 billion in the quarter outpaced the Zacks Consensus Estimate of $6.38 billion. Moreover, total revenues increased 12% year over year.
Amgen narrowed its revenue guidance range from $25.0-$25.6 billion to $25.1-$25.5 billion. Adjusted earnings per share guidance was raised from a range of $15.10 to $15.75 to $15.80 to $16.15 per share.
On Oct 28, Gilead Sciences (GILD - Free Report) reported earnings of $2.11 per share in the September-end quarter, up from $1.64 in the year-ago quarter and surpassed the Zacks Consensus Estimate of $1.83. Total revenues of $6.60 billion surpassed the Zacks Consensus Estimate of $6.20 billion and rose 17% from the year-ago period. Growing sales from Veklury largely supported the upside during the quarter.
Gilead lowered its annual guidance. Product sales are now projected to be $23-$23.5 billion versus the previous guidance of $23-$25 billion. Earnings per share are expected to be $6.25-$6.60 in comparison to the earlier guidance of $6.25-$7.65.
On Oct 21, Biogen (BIIB - Free Report) reported third-quarter 2020 earnings per share of $8.84, which surpassed the Zacks Consensus Estimate of $8.06. Earnings slid 4% year over year on lower revenues. Sales of the company totaled $3.38 billion, down 6% from the year-ago quarter. Sales, however, marginally surpassed the Zacks Consensus Estimate of $3.35 billion. The company’s top-lined saw softer sales of multiple sclerosis drug Tecfidera and spinal muscular atrophy drug, Spinraza.
On Oct 29, Alexion Pharmaceuticals posted third-quarter adjusted earnings of $3.24 per share, which rose from the year-ago quarter’s $2.79. Earnings also outpaced the Zacks Consensus Estimate of $2.59. Revenues were up 26% year over year to $1.59 billion and outpaced the Zacks Consensus Estimate of $1.42 billion on higher sales of Soliris, Ultomiris and Strensiq.
Alexion updated the guidance. It raised the total revenues and adjusted earnings per share guidance and slashed the operating margin outlook.
Biotech ETFs in Focus
In the current scenario, we believe it is prudent to discuss a few ETFs which have a relatively wider exposure to the companies discussed.
iShares Nasdaq Biotechnology ETF (IBB - Free Report)
This fund seeks to provide exposure to U.S. biotechnology stocks and tracks the Nasdaq Biotechnology Index. It comprises 203 holdings with the above-mentioned companies taking about 21.2% of the fund. It has AUM of $8.88 billion and charges a fee of 46 basis points a year. IBB has lost 2.8% since Oct 20 (as of Nov 4). The fund carries a Zacks ETF Rank #2 (Buy), with a High-risk outlook (read: Moderna Expects COVID-19 Vaccine Data in November: ETFs to Gain).
VanEck Vectors Biotech ETF (BBH - Free Report)
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 24 securities in its basket, with the concerned companies having 31% weight in the fund. Its AUM is $458 million and expense ratio is 0.35%. BBH has lost 3.3% since Oct 20 (as of Nov 4). The fund currently carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook (see all Health Care ETFs here).
SPDR S&P Biotech ETF (XBI - Free Report)
The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 139 securities in its basket and puts some weight in-focus companies. Its AUM is $5.31 billion and expense ratio is 0.35%. XBI has lost 0.8% since Oct 20 (as of Nov 4). The fund carries a Zacks ETF Rank #2, with a High-risk outlook (read: Trump vs. Biden: ETF Strategies for the Election Outcome).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>