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5 Least-Hurt Biotech ETFs of the Last Week

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Wall Street was downbeat last week due to rising rate worries. The S&P 500 and the Nasdaq recorded the worst week since December. Investors analyzed the recent commentary from Federal Reserve and mixed-to-upbeat economic data points. This has resulted in a rise in rates as the Fed is now believed to be hiking rates more than expected before.

The U.S. benchmark treasury yield started the week at 3.63% and ended the week at 3.74% while the two-year U.S. treasury yield started the week at 4.44% and ended the week at 4.50%. Such an uptick in rates caused a decline in Wall Street.

As the biotech sector is high-growth in nature, a rising rate environment went against of the sector.  In any case, several biotech ETFs have underperformed the S&P 500 (up 6.54%) this year. Last week was more painful specifically. Direxion Daily S&P Biotech Bear 3x Shares (LABD - Free Report) has added 21.5% last week as higher rates weighed on growth stocks.

Let’s delve a little deeper.

Drag in the Biotech Sector

A recent article from Wall Street Journal elaborated that after years of easy money and healthy growth, the biotech industry is feeling the pinch of funding crunch. But biotechs have cut thousands of jobs lately. The ebbing pandemic resulted in lower demand for Covid-19 vaccines and treatments. The sector has underperformed due to research failures, slowing M&A and rising interest rates.

WSJ article pointed out “in recent weeks, Finch Therapeutics Group Inc. said it was halting development of its most advanced drug, making arrangements to sell its other assets and laying off 95% of its staff. In addition, privately held Goldfinch Bio Inc. shut down after failing to raise money. Vyant Bio Inc. said it was seeking strategic alternatives.”

Pharmaceutical and other life-sciences companies laid off 7,387 people in 2022, according to the most recent data from global outplacement firm Challenger, Gray & Christmas Inc. In January, the sector had 1,449 layoffs, up from 174 a year earlier, according to Challenger, as quoted on Wall Street Journal.

Is There Ray of Hope?

Latest earnings from some of the big players came in at upbeat. Amgen (AMGN - Free Report) reported strong fourth-quarter results, topping earnings and sales estimates. However, the outlook for 2023 disappointed investors. Key products like Repatha, Prolia and Evenity posted solid growth.

Bristol Myers (BMY - Free Report) reported better-than-expected results for the fourth quarter of 2022. However, there was generic competition for multiple myeloma (MM) drug and Revlimid. Gilead Sciences (GILD - Free Report) reported better-than-expected fourth-quarter results due to continued solid demand for its HIV portfolio with further share growth for flagship therapy Biktarvy and oncology revenues driven by the cell therapy franchise and Trodelvy.

Regeneron (REGN - Free Report) posted better-than-expected fourth-quarter 2022 results even though Eylea sales were hurt by a short-term shift to off-label use of Avastin (bevacizumab), a temporary closing in the fourth quarter of a not-for-profit fund that provides patient co-pay assistance and an increase in sales-related deductions. Regeneron also announced that the FDA has approved the label expansion of the ophthalmology drug Eylea (aflibercept) for treating preterm infants with retinopathy of prematurity (ROP).

Winning ETFs in Focus

Against this backdrop, below we highlight a few biotech ETFs that were the least-hurt last week.

First Trust NYSE Arca Biotechnology Index Fund (FBT - Free Report) – Down 3% Past Week

Virtus LifeSci Biotech Products ETF (BBP - Free Report) – Down 3.2%

Invesco Dynamic Biotechnology & Genome ETF (PBE - Free Report) – Down 3.3%

VanEck Biotech ETF (BBH - Free Report) – Down 3.4%

iShares Biotechnology ETF (IBB - Free Report) – Down 3.5%

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