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How Will Biotech ETFs React to These Q1 Earnings Releases?

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The world’s largest economy has started to witness a decline in the number of new coronavirus cases. There is no doubting in the fact that the pandemic has triggered a race to introduce vaccines and treatment options, 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, a large COVID-19 vaccination drive has buoyed hopes of faster U.S. economic reopening of non-essential businesses and the return to normalcy. Strengthening the optimism, the United States has administered around 200 million doses of vaccines under 100 days of Biden administration, per a CNN report. According to the U.S. Centers for Disease Control and Prevention (CDC), more than half of American adults have received at least one vaccine dose, per a Reuters article. In such a scenario, let’s take a look at some top coronavirus vaccine stories of April.

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 Apr 27, Amgen (AMGN - Free Report) reported first-quarter 2021 earnings of $3.70 per share, which lagged the Zacks Consensus Estimate of $4.00. Earnings decreased 12% year over year, largely due to lower revenues. Total revenues of $5.90 billion in the quarter missed the Zacks Consensus Estimate of $6.23 billion. Also, total revenues declined 4% year over year largely due to lower net selling prices denting sales of several drugs.

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 Apr 29, Gilead Sciences (GILD - Free Report) reported earnings of $2.08 per share for the March-end quarter, up from $1.68 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $2.06. Total revenues of $6.40 billion lagged the Zacks Consensus Estimate of $6.80 billion but rose 16% from the year-ago quarter mainly owing to incremental sales of Veklury.

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

On Apr 22, Biogen (BIIB - Free Report) reported first-quarter 2021 earnings per share of $5.34, which surpassed the Zacks Consensus Estimate of $5.06. Earnings slid 41.6% year over year on lower revenues. Sales of the company totaled $2.69 billion, down 24% from the year-ago quarter. Sales, however, surpassed the Zacks Consensus Estimate of $2.68 billion. The company saw softer sales of Tecfidera, Spinraza and biosimilar drugs due to growing competition.

On Apr 30, Alexion Pharmaceuticals  posted first-quarter adjusted earnings of $3.52 per share, which rose from the year-ago quarter’s $3.22. Earnings also outpaced the Zacks Consensus Estimate of $3.08. Revenues rose 13.3% year over year to $1.64 billion and outpaced the Zacks Consensus Estimate of $1.57 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 278 holdings with the above-mentioned companies taking about 23% of the fund. It has AUM of $10.01 billion and charges a fee of 46 basis points a year. IBB has lost about 3.6% since Apr 21 (as of May 5). The fund carries a Zacks ETF Rank #2 (Buy), with a High-risk outlook (read: Top COVID-19 Vaccine Stories of April Put Biotech ETFs in Focus).

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 25 securities in its basket, with the concerned companies having 25.2% weight in the fund. Its AUM is $512.3 million and expense ratio is 0.35%. BBH has lost around 3.6% since Apr 21 (as of May 5). The fund currently carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook.

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 191 securities in its basket and puts some weight in-focus companies. Its AUM is $7.04 billion and expense ratio is 0.35%. XBI has lost around 3.9% since Apr 21 (as of Feb 5). The fund carries a Zacks ETF Rank #2, with a High-risk outlook (read: Best Biotech Stocks & ETFs for mRNA, Gene Editing).

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