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How Are Biotech ETFs Reacting to Q2 Earnings Releases?
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The Biotech sector has been in a sweet spot for quite some time now. Biotech stocks were huge beneficiaries of the pandemic as many of these companies were developing new vaccines and treatments for Covid-19, leading to a surge in IPOs and venture capital investments. But then the stocks have been beaten down massively only to revive now. iShares Biotechnology ETF (IBB - Free Report) is up 7.6% past month (as of Aug 15, 2022).
Per FT, hedge funds have started buying beaten-down biotech stocks, since they believe that ultra-cheap valuations could revive M&A activity in the space. Many big pharma companies are looking to boost their drug pipelines through acquisitions (read: Should You Buy Beaten-Down Biotech Stocks & ETFs?).
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
In early August, Amgen (AMGN - Free Report) reported second-quarter 2022 earnings of $4.65 per share, which beat the Zacks Consensus Estimate of $4.40. In the year-ago quarter, earnings were $1.77 per share. Lower operating expenses and share count boosted earnings in the quarter.
Total revenues of $6.59 billion beat the Zacks Consensus Estimate of $6.54 billion. Total revenues rose 1% year over year, driven by growth in product sales, which offset the impact of lower Other revenues.
Total product revenues rose 3% from the year-ago quarter to $6.28 billion (U.S.: $4.45 billion; ex-U.S.: $1.84 billion). Higher volumes were offset by lower selling prices of several drugs and currency headwinds. Volumes rose 10% in the quarter, offset by a 6% lower net selling price. Foreign exchange movement hurt sales by 2% in the quarter.
Other revenues were $313 million in the quarter, down 24% year over year, primarily due to lower COVID-19 antibody manufacturing collaboration revenues compared to last year’s second quarter. Amgen tightened its previously issued revenue guidance while maintaining its adjusted earnings guidance range.
In early August, Gilead Sciences (GILD - Free Report) reported strong second-quarter results driven by continued solid demand for its HIV portfolio with further share growth for flagship therapy Biktarvy, and oncology revenues driven by cell therapy and Trodelvy. Sales of COVID-19 treatment Veklury (remdesivir) declined as predicted but came in better than expected.
The company reported earnings of $1.58 per share in the quarter, which beat the Zacks Consensus Estimate of $1.51 but were down from $1.81 in the year-ago quarter. Total product sales were flat at $6.1 billion in the quarter under review. Excluding Veklury, product sales increased 7% year over year to $5.7 billion due to growth in the HIV, Cell Therapy and Trodelvy (sacituzumab govitecan-hziy) businesses.
Product sales are now projected between $24.5 billion and $25.0 billion (earlier projection- $23.8–$24.3 billion). Total product sales, excluding Veklury, are expected to be $22.0 billion to $22.5 billion (previous projection: $21.8–$22.3 billion).
In late July, Biogen (BIIB - Free Report) reported second-quarter 2022 earnings per share (EPS) of $5.25, which significantly beat the Zacks Consensus Estimate of $4.10. In the year-ago quarter, Biogen had recorded earnings of $5.25 per share.
Sales came in at $2.59 billion, down 7% on a reported basis (5% on a constant currency basis) from the year-ago quarter, hurt by lower sales of Tecfidera and Spinraza. Sales, however, beat the Zacks Consensus Estimate of $2.47 billion.
Product sales in the quarter were $2.05 billion, down 8.1% year over year. Royalties on sales of Roche’s (RHHBY) Ocrevus were $291.9 million in the quarter, up 13.6% year over year.
Biotech ETFs in Focus
We believe it is prudent to discuss a few ETFs with a relatively wider exposure to the companies discussed above in the current scenario.
It holds about 25 securities in its basket, with the concerned companies having about 25% weight in the fund. IT charges 35 bps in fees. It has gained 5.4% past month.
Image: Bigstock
How Are Biotech ETFs Reacting to Q2 Earnings Releases?
The Biotech sector has been in a sweet spot for quite some time now. Biotech stocks were huge beneficiaries of the pandemic as many of these companies were developing new vaccines and treatments for Covid-19, leading to a surge in IPOs and venture capital investments. But then the stocks have been beaten down massively only to revive now. iShares Biotechnology ETF (IBB - Free Report) is up 7.6% past month (as of Aug 15, 2022).
Per FT, hedge funds have started buying beaten-down biotech stocks, since they believe that ultra-cheap valuations could revive M&A activity in the space. Many big pharma companies are looking to boost their drug pipelines through acquisitions (read: Should You Buy Beaten-Down Biotech Stocks & ETFs?).
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
In early August, Amgen (AMGN - Free Report) reported second-quarter 2022 earnings of $4.65 per share, which beat the Zacks Consensus Estimate of $4.40. In the year-ago quarter, earnings were $1.77 per share. Lower operating expenses and share count boosted earnings in the quarter.
Total revenues of $6.59 billion beat the Zacks Consensus Estimate of $6.54 billion. Total revenues rose 1% year over year, driven by growth in product sales, which offset the impact of lower Other revenues.
Total product revenues rose 3% from the year-ago quarter to $6.28 billion (U.S.: $4.45 billion; ex-U.S.: $1.84 billion). Higher volumes were offset by lower selling prices of several drugs and currency headwinds. Volumes rose 10% in the quarter, offset by a 6% lower net selling price. Foreign exchange movement hurt sales by 2% in the quarter.
Other revenues were $313 million in the quarter, down 24% year over year, primarily due to lower COVID-19 antibody manufacturing collaboration revenues compared to last year’s second quarter. Amgen tightened its previously issued revenue guidance while maintaining its adjusted earnings guidance range.
In early August, Gilead Sciences (GILD - Free Report) reported strong second-quarter results driven by continued solid demand for its HIV portfolio with further share growth for flagship therapy Biktarvy, and oncology revenues driven by cell therapy and Trodelvy. Sales of COVID-19 treatment Veklury (remdesivir) declined as predicted but came in better than expected.
The company reported earnings of $1.58 per share in the quarter, which beat the Zacks Consensus Estimate of $1.51 but were down from $1.81 in the year-ago quarter. Total product sales were flat at $6.1 billion in the quarter under review. Excluding Veklury, product sales increased 7% year over year to $5.7 billion due to growth in the HIV, Cell Therapy and Trodelvy (sacituzumab govitecan-hziy) businesses.
Product sales are now projected between $24.5 billion and $25.0 billion (earlier projection- $23.8–$24.3 billion). Total product sales, excluding Veklury, are expected to be $22.0 billion to $22.5 billion (previous projection: $21.8–$22.3 billion).
In late July, Biogen (BIIB - Free Report) reported second-quarter 2022 earnings per share (EPS) of $5.25, which significantly beat the Zacks Consensus Estimate of $4.10. In the year-ago quarter, Biogen had recorded earnings of $5.25 per share.
Sales came in at $2.59 billion, down 7% on a reported basis (5% on a constant currency basis) from the year-ago quarter, hurt by lower sales of Tecfidera and Spinraza. Sales, however, beat the Zacks Consensus Estimate of $2.47 billion.
Product sales in the quarter were $2.05 billion, down 8.1% year over year. Royalties on sales of Roche’s (RHHBY) Ocrevus were $291.9 million in the quarter, up 13.6% year over year.
Biotech ETFs in Focus
We believe it is prudent to discuss a few ETFs with a relatively wider exposure to the companies discussed above in the current scenario.
iShares Biotechnology ETF (IBB - Free Report)
It comprises about 375 holdings, with the companies mentioned above taking about 20% of the fund. It charges 44 bps in fees.
VanEck Biotech ETF (BBH - Free Report)
It holds about 25 securities in its basket, with the concerned companies having about 25% weight in the fund. IT charges 35 bps in fees. It has gained 5.4% past month.
SPDR S&P Biotech ETF (XBI - Free Report)
It holds about 150 securities in its basket and puts some weight in-focus companies. XBI is up 12.6% past month. The fund charges 35 bps in fees.