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How Are Biotech ETFs Reacting to These Q2 Earnings Releases?
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The pandemic has triggered a race to introduce vaccines and treatment options, opening up investing opportunities in the biotech sector. Moreover, increasing mergers and acquisition (M&A) deals, growing AI dominance and favorable regulatory tidings continue to work in favor of the biotech market.
Unfortunately, the United States is seeing a rising number of new delta variant cases. The new cases arising from the variant is being mostly observed among the unvaccinated population. In order to combat the situation, President Joe Biden has informed about some new initiatives to improve the vaccination rate. One of the measures is making it mandatory for all federal employees to attest to being vaccinated or deal with strict protocols, according to a CNN report.
Major companies are also making it mandatory for their employees to get vaccinated before returning to company campuses. Important names like Google (GOOGL), Facebook (FB), Netflix (NFLX) and BlackRock can be safely added to the list of companies with a vaccine mandate.
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 Aug 3, Amgen (AMGN - Free Report) reported second-quarter 2021 earnings of $4.38 per share, surpassing the Zacks Consensus Estimate of $4.13. Earnings increased 4% year over year, largely due to higher revenues and lower share count. Total revenues of $6.53 billion in the quarter outpaced the Zacks Consensus Estimate of $6.43 billion. Also, total revenues rose 5% year over year largely as higher volumes offset lower net selling prices of several drugs.
Amgen reiterated its revenue guidance for 2021 in the range of $25.8-$26.6 billion and adjusted earnings per share guidance at $16.00 to $17.00.
On Jul 29, Gilead Sciences (GILD - Free Report) reported earnings of $1.87 per share for the June-end quarter, up from $1.11 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.76. Total revenues of $6.2 billion outpaced the Zacks Consensus Estimate of $6.1 billion and rose 21% from the year-ago quarter mainly on growing sales of Veklury.
Product sales are projected at around $24.4-$25 billion versus the previously stated range of $23.7-$25.1 billion. Veklury sales are expected in the range of $2.7-$3.1 billion compared to $2.0-$3.0 billion estimated earlier, considering the ongoing role of the drug in the pandemic. Earnings per share are expected in the range of $6.90-$7.25, compared to the previously-expected range of $6.75-$7.45.
On Jul 22, Biogen (BIIB - Free Report) reported second-quarter 2021 earnings per share of $5.68, which surpassed the Zacks Consensus Estimate of $4.57. Earnings slid 42.3% year over year on lower revenues. Sales of the company totaled $2.78 billion, down 25% from the year-ago quarter. Sales, however, surpassed the Zacks Consensus Estimate of $2.61 billion. The company saw softer sales of Tecfidera and Spinraza, which offset higher sales of Tysabri and biosimilars in the reported quarter.
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.
This fund seeks to track the investment results of an index composed of U.S.-listed equities in the biotechnology sector. It comprises 270 holdings with the above-mentioned companies, taking about 17.5% of the fund. It has AUM of $11.90 billion and charges a fee of 45 basis points a year. IBB has returned about 1.8% since Jul 21 (as of Aug 11). The fund carries a Zacks ETF Rank #2 (Buy), with a High-risk outlook (read: ETF Investing Areas to Consider for August).
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 17.9% weight in the fund. Its AUM is $629.3 million and expense ratio is 0.35%. BBH has returned around 2.8% since Jul 21 (as of Aug 11). The fund currently carries a Zacks ETF Rank #2, with a High-risk outlook (read: Sanofi to Buy mRNA Developer: ETFs in Focus).
The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 196 securities in its basket and puts some weight in-focus companies. Its AUM is $6.99 billion and expense ratio is 0.35%. XBI has lost around 3.5% since Jul 21 (as of Aug 11). The fund carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook (read: Delta Variant Surge Brings Biotech ETFs in Focus).
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How Are Biotech ETFs Reacting to These Q2 Earnings Releases?
The pandemic has triggered a race to introduce vaccines and treatment options, opening up investing opportunities in the biotech sector. Moreover, increasing mergers and acquisition (M&A) deals, growing AI dominance and favorable regulatory tidings continue to work in favor of the biotech market.
Unfortunately, the United States is seeing a rising number of new delta variant cases. The new cases arising from the variant is being mostly observed among the unvaccinated population. In order to combat the situation, President Joe Biden has informed about some new initiatives to improve the vaccination rate. One of the measures is making it mandatory for all federal employees to attest to being vaccinated or deal with strict protocols, according to a CNN report.
Major companies are also making it mandatory for their employees to get vaccinated before returning to company campuses. Important names like Google (GOOGL), Facebook (FB), Netflix (NFLX) and BlackRock can be safely added to the list of companies with a vaccine mandate.
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 Aug 3, Amgen (AMGN - Free Report) reported second-quarter 2021 earnings of $4.38 per share, surpassing the Zacks Consensus Estimate of $4.13. Earnings increased 4% year over year, largely due to higher revenues and lower share count. Total revenues of $6.53 billion in the quarter outpaced the Zacks Consensus Estimate of $6.43 billion. Also, total revenues rose 5% year over year largely as higher volumes offset lower net selling prices of several drugs.
Amgen reiterated its revenue guidance for 2021 in the range of $25.8-$26.6 billion and adjusted earnings per share guidance at $16.00 to $17.00.
On Jul 29, Gilead Sciences (GILD - Free Report) reported earnings of $1.87 per share for the June-end quarter, up from $1.11 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.76. Total revenues of $6.2 billion outpaced the Zacks Consensus Estimate of $6.1 billion and rose 21% from the year-ago quarter mainly on growing sales of Veklury.
Product sales are projected at around $24.4-$25 billion versus the previously stated range of $23.7-$25.1 billion. Veklury sales are expected in the range of $2.7-$3.1 billion compared to $2.0-$3.0 billion estimated earlier, considering the ongoing role of the drug in the pandemic. Earnings per share are expected in the range of $6.90-$7.25, compared to the previously-expected range of $6.75-$7.45.
On Jul 22, Biogen (BIIB - Free Report) reported second-quarter 2021 earnings per share of $5.68, which surpassed the Zacks Consensus Estimate of $4.57. Earnings slid 42.3% year over year on lower revenues. Sales of the company totaled $2.78 billion, down 25% from the year-ago quarter. Sales, however, surpassed the Zacks Consensus Estimate of $2.61 billion. The company saw softer sales of Tecfidera and Spinraza, which offset higher sales of Tysabri and biosimilars in the reported quarter.
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 Biotechnology ETF (IBB - Free Report)
This fund seeks to track the investment results of an index composed of U.S.-listed equities in the biotechnology sector. It comprises 270 holdings with the above-mentioned companies, taking about 17.5% of the fund. It has AUM of $11.90 billion and charges a fee of 45 basis points a year. IBB has returned about 1.8% since Jul 21 (as of Aug 11). The fund carries a Zacks ETF Rank #2 (Buy), with a High-risk outlook (read: ETF Investing Areas to Consider for August).
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 17.9% weight in the fund. Its AUM is $629.3 million and expense ratio is 0.35%. BBH has returned around 2.8% since Jul 21 (as of Aug 11). The fund currently carries a Zacks ETF Rank #2, with a High-risk outlook (read: Sanofi to Buy mRNA Developer: ETFs in Focus).
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 196 securities in its basket and puts some weight in-focus companies. Its AUM is $6.99 billion and expense ratio is 0.35%. XBI has lost around 3.5% since Jul 21 (as of Aug 11). The fund carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook (read: Delta Variant Surge Brings Biotech ETFs in Focus).