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Biotech Stocks & ETFs to Gain on Progress in COVID-19 Vaccine Development

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The coronavirus pandemic is going from bad to worse with more than 860,000 confirmed cases and above 42,000 casualties globally, per a Johns Hopkins University data.

The United States continues to top the chart with the highest number of coronavirus infected cases. It recorded in excess of 185,400 cases with a death toll of more than 3,800. Highlighting this grim scenario, President Donald Trump on Mar 31 during a White House news conference said that "I want every American to be prepared for the hard days that lie ahead. We're going to go through a very tough two weeks" (read: Healthcare ETFs Gain on Rising Demand for COVID-19 Tests). 

The top government scientists have estimated that even if current social distancing guidelines are maintained, United States can see around 100,000-240,000 fatalities from the coronavirus pandemic.

In such a situation, the entire world is hoping for a rapid development of the COVID-19 vaccine. In fact, per a Guardian article, at least 43 Covid-19 vaccines are in development globally in the labs of various universities and companies across countries like Brisbane, Hong Kong, the United States, the U.K. et al. Notably, most of the vaccines are DNA or RNA types. Notably, mRNA vaccine against COVID-19 was made in 63 days by Moderna Inc. (MRNA - Free Report) and the first participant in the Phase 1 trial received a dose of the vaccine candidate on Mar 16. However, the Phase 1 clinical trial is expected to conclude on Jun 1, 2021.

COVID-19 Vaccine Competition Heats Up

Large pharmaceutical player Johnson & Johnson JNJ announced that it selected a lead vaccine candidate for COVID-19 on Mar 30, driving an 8% gain in its shares. The company expects to initiate a phase I study on the candidate in September 2020 under an accelerated timeline. Safety and efficacy data from the study is likely to be available by this year-end, based on which, the company expects a vaccine to be available for emergency use in early 2021. Notably, J&J also identified two back-up candidates apart from the chief COVID-19 candidate.

J&J expanded its agreement with the Biomedical Advanced Research and Development Authority (BARDA), part of the U.S. Department of Health and Human Services related to development of antiviral vaccines to accelerate its COVID-19 vaccine program in February. The company further extended the deal under which, both parties consented to commit more than $1-billion investment in co-funding vaccine research, development and clinical testing.

Last month, Pfizer Inc. PFE informed about its plans to support the development and distribution of BioNTech SE’s (BNTX - Free Report) COVID-19 vaccine candidate. BioNTech aims to start the clinical trials for the vaccine candidate in late April across the United States and Germany. Giving a steady competition, the COVID-19 vaccine candidate of Heat Biologics, Inc. is added to WHO’s “draft landscape” of 41 candidate vaccines. In March, IMV Inc. (IMV - Free Report) also announced that it plans to start the clinical development of a DPX-based vaccine candidate for the treatment of the COVID-19. The DPX-COVID-19 vaccine will be made using its DPX technology platform.

In the race for the COVID-19 vaccine, we also have Sanofi SNY, which in collaboration with BARDA is working to test a preclinical vaccine candidate for severe acute respiratory syndrome ("SARS") for COVID-19 using its recombinant DNA platform. Moreover, the company will coordinate with Translate Bio TBIO to develop mRNA vaccine for COVID-19. In its quest to develop the COVID-19 vaccine, Novavax NVAX received $4 million from Coalition for Epidemic Preparedness Innovation (“CEPI”) in March. Moreover, Emergent BioSolutions EBS will be providing support for the contract development and manufacturing of the experimental vaccine. Notably, Emergent BioSolutions has already initiated the development of two product candidates for treating and preventing COVID-19. The company is developing the two candidates to leverage its hyperimmune platforms.

Some companies have been observed to share their technology platforms for the rapid-development of the COVID-19 vaccine. The biopharmaceutical company Dynavax Technologies Corporation DVAX in collaboration with CEPI decided to allow usage of its adjuvant technology by companies developing COVID-19 vaccines alongside working on the vaccine development with the University of Queensland, Australia. A very popular name among the vaccine makers, GlaxoSmithKline plc GSK, is also granting the rights to employ its vaccine adjuvant platform technology by the University of Queensland.

ETFs to Gain

The continuous competition to introduce vaccine for the COVID-19 is springing near-term opportunities, making the biotech sector a prospective space for investments. Therefore, we discuss a few ETFs below that seek to provide exposure to the biotech sector:

iSharesNasdaq Biotechnology ETF (IBB - Free Report)

This fund seeks to provide exposure to U.S. biotechnology stocks and tracks the NASDAQ Biotechnology Index. It comprises 214 holdings. It has an AUM of $6.34 billion and charges a fee of 47 basis points a year. It has a Zacks Rank #2 (Buy) with a High risk outlook (read: ETF Strategies to Play the Rising Virus-Induced Volatility).

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 123 securities in its basket. It has AUM of $3.55 billion and an expense ratio of 0.35%. The fund has a Zacks Rank #2 with a High risk outlook (read: 5 Low-Cost Top-Ranked ETFs to Tap at Discounted Prices).

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. Its AUM is $319.3 million and it has an expense ratio of 0.35%. The fund has a Zacks Rank #2 with a High-risk outlook.

Some healthcare ETFs can also be considered:

Health Care Select Sector SPDR Fund (XLV - Free Report)

The most popular healthcare ETF, XLV follows the Health Care Select Sector Index. In total, the fund holds 60 securities in its basket, with the pharma sector taking the largest share at 33.3%. Healthcare equipment and supplies, healthcare providers and services, and biotech also have double-digit exposure each. The product manages nearly $18.56 billion in its asset base. The expense ratio is at 0.13%. XLV has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETF Strategies & Best Practices Amid Coronavirus Volatility).

Vanguard Health Care ETF (VHT - Free Report)

The Vanguard Health Care ETF seeks to track the performance of the MSCI US Investable Market Health Care 25/50 Index. This fund comprises stocks of companies involved in providing medical or health care products, services, technology, or equipment. The fund holds 389 stocks in its basket and has a 0.10% expense ratio. It has accumulated $8.73 billion in its asset base. VHT has a Zacks ETF Rank #2 with a Medium risk outlook.

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