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How Will Biotech ETFs React to Q4 Earnings?

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The coronavirus outbreak is aggravating in the United States and globally, with the number of infected cases increasing. Thus, any positive news highlighting the progress of vaccine developers or antibody manufacturers is expected to create great returns for investors.

The pandemic has also a triggered a race to introduce vaccine and treatment, thereby opening up investing opportunities in the biotech sector over the past year. Consequently, this hot space for investments had a good run on the bourses during this period.

Notably, the world has now witnessed another grim milestone in the coronavirus outbreak as the number of confirmed cases has crossed the 100-million mark, according to Johns Hopkins University data. Going by the latest World Bank figures, considering the world population of about 7.67 billion, the global case numbers are signaling that about one in every 76 people has now had the coronavirus infection, as mentioned in a CNN report. It seems like the mutations have accelerated the spread of the virus.

The United States has also sadly crossed another glaring mark of more than 25 million coronavirus cases, with the death toll surpassing 400,000. Raising worries, health experts are "extremely" concerned about the new coronavirus variants that have been discovered in the United States, per a CNN report.

Buoying optimism, Moderna (MRNA) recently informed that its COVID-19 vaccine helped develop antibodies that neutralized coronavirus variants, which were first detected in the United Kingdom and South Africa, per a CNN report.

Novavax (NVAX) has also recently announced very encouraging updates on its protein-based COVID-19 vaccine candidate NVX-CoV2373. Per management, the vaccine candidate met the primary endpoint, delivering an efficacy of 89.3%, in its Phase 3 clinical trial conducted in the United Kingdom.

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 Feb 2, Amgen (AMGN - Free Report) reported fourth-quarter 2020 earnings of $3.81 per share, which surpassed the Zacks Consensus Estimate of $3.36. Earnings increased 5% year over year, largely on the back of higher revenues. Total revenues of $6.63 billion in the quarter outpaced the Zacks Consensus Estimate of $6.57 billion. Moreover, total revenues increased 7% year over year.

Amgen guided revenues in the range of $25.8-$26.6 billion. Adjusted earnings per share are expected in the range of $16.00 to $17.00 per share. 

On Feb 4, Gilead Sciences (GILD - Free Report) reported earnings of $2.19 per share for the December-end quarter, up from $1.10 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $2.15. Total revenues of $7.4 billion beat the Zacks Consensus Estimate of $7.11 billion and increased 26% from the year-ago quarter mainly owing to incremental sales of Veklury.

Product sales are projected around $23.7-$25.1 billion. Veklury sales are expected to be in the range of $2-$3 billion. Earnings per share are expected in the range of $6.75-$7.45.

On Feb 3, Biogen (BIIB - Free Report) reported fourth-quarter 2020 earnings per share of $4.58, which lagged the Zacks Consensus Estimate of $4.93. Earnings slid 45.1% year over year on lower revenues. Sales of the company totaled $2.85 billion, down 22% from the year-ago quarter. Sales, however, surpassed the Zacks Consensus Estimate of $2.82 billion. The company saw softer sales of multiple sclerosis drug Tecfidera and spinal muscular atrophy drug, Spinraza.

On Feb 4, Alexion Pharmaceuticals  posted fourth-quarter adjusted earnings of $2.96 per share, which rose from the year-ago quarter’s $2.71. Earnings also outpaced the Zacks Consensus Estimate of $2.50. Revenues were up 15% year over year to $1.59 billion and outpaced the Zacks Consensus Estimate of $1.51 billion on higher sales of Soliris, Ultomiris and Strensiq.

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 above.

iShares Nasdaq Biotechnology ETF (IBB - Free Report)

This fund seeks to provide exposure to U.S. biotechnology and pharmaceutical stocks and tracks the Nasdaq Biotechnology Index. It comprises 282 holdings with the above-mentioned companies taking about 19.7% of the fund. It has AUM of $10.95 billion and charges a fee of 46 basis points a year. IBB has returned about 1% since Feb 2 (as of Feb 5). The fund carries a Zacks ETF Rank #2 (Buy), with a High-risk outlook (read: Novavax (NVAX) ETFs to Rise on Impressive Coronavirus Vaccine Update).

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 28.04% weight in the fund. Its AUM is $523.6 million and expense ratio is 0.35%. BBH has gained 0.6% since Feb 2 (as of Feb 5). 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 170 securities in its basket and puts some weight in-focus companies. Its AUM is $7.94 billion and expense ratio is 0.35%. XBI has lost 0.3% since Feb 2 (as of Feb 5). The fund carries a Zacks ETF Rank #2, with a High-risk outlook (read: Can Moderna ETFs Gain on COVID Vaccine Update Against Variants?).

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