Back to top

Image: Bigstock

Healthcare ETFs to Gain on Progress in Coronavirus Vaccine

Read MoreHide Full Article

The coronavirus has infected more than three million people across the globe. The death toll has surpassed 200,000 worldwide, according to Johns Hopkins University. In such a scenario, the desperation for a vaccine or treatment is rising by the hour. In fact, according to the latest WHO report, around six vaccine candidates have entered the clinical evaluation stage. These candidates belong to Moderna Inc. (MRNA - Free Report) and Inovio Pharmaceuticals Inc. (INO) along with China's Sinovac, CanSino Biological Inc., Beijing Institute of Biological Products and University of Oxford. Moreover, around 77 vaccine candidates are under preclinical evaluation, per the report.

Latest Progress in Vaccine Development

Large pharmaceutical player, Johnson & Johnson (JNJ - Free Report) has entered into a manufacturing deal with Emergent BioSolutions Inc. (EBS) to strengthen the U.S.-based manufacturing capacity for its COVID-19 vaccine candidate. 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 has also identified two back-up candidates apart from the chief COVID-19 candidate.

Moving on, Pfizer (PFE - Free Report) and Germany-based biotech BioNTech recently received approval from the local regulatory authority, the Paul-Ehrlich-Institute, to initiate a phase I/II study to evaluate BioNTech’s BNT162 vaccine program to prevent COVID-19 infection. They plan to initiate the study shortly. Notably, these companies had signed a deal to co-develop mRNA-based vaccines for COVID-19 last month.

Heating up the competition, pharmaceutical giants Sanofi (SNY - Free Report) and GlaxoSmithKline plc (GSK - Free Report) joined forces to speed up development of a vaccine for the virus on Apr 14. Both drug makers plan to begin the initial clinical tests of the vaccine prototype in the second half of 2020. The vaccine should be available in the second half of 2021, if the results are positive.

Meanwhile, Novavax has identified a coronavirus vaccine candidate, NVX-CoV2373, and plans to start a first-in-human trial in mid-May. Moderna has initiated a phase 1 trial of COVID-19 vaccine candidate, enrolling subjects at the highest dose. The trial has three arms that are administering doses of 25 mcg, 100 mcg and 250 mcg.

ETFs to Gain

The competition to come up with a vaccine is opening up near-term opportunities, making the biotech sector a prospective space for investments. Therefore, we discuss a few ETFs that seek to provide exposure to the biotech sector:

iSharesNasdaq Biotechnology ETF (IBB - Free Report)

This fund looks to provide exposure to U.S. biotechnology and pharmaceutical stocks and tracks the NASDAQ Biotechnology Index. It comprises 210 holdings. It has AUM of $8.06 billion and charges a fee of 47 basis points a year (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 122 securities in its basket. It has AUM of $4.55 billion and an expense ratio of 0.35% (read: 6 Top-Ranked ETFs Beating the Market).        

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 $389.1 million and it has an expense ratio of 0.35%.

Some healthcare ETFs can also be considered:

The 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 33.2%. Healthcare equipment and supplies, healthcare providers and services, and biotech also have double-digit exposure each. The product manages nearly $24.82 billion in its asset base. The expense ratio is at 0.13% (read: Healthcare ETFs Looks Strong Ahead of Q1 Earnings).

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 $10.24 billion in its asset base.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>