How Are Biotech ETFs Reacting to These Q3 Earnings Releases?

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There is no denying that the pandemic has opened up investment opportunities in the biotech sector by triggering a race to introduce vaccines and treatment options. Moreover, increasing mergers and acquisition (M&A) deals, growing AI dominance and favorable regulatory tidings continue to work in favor of the biotech market.

Going on, the full FDA approval for COVID-19 vaccines to certain developers has been increasing the confidence for imposing vaccine mandates. Also, the unvaccinated population is now more likely to opt for vaccinations. The nod for booster shots can likely enhance people’s confidence in vaccination. This  is going to accelerate demand for coronavirus vaccines and boost the COVID-19 vaccine developer’s financials.

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 Nov 2, Amgen AMGN reported third-quarter 2021 earnings of $4.67 per share, surpassing the Zacks Consensus Estimate of $4.22. Earnings increased 11% year over year, largely due to lower costs. Total revenues of $6.71 billion in the quarter outpaced the Zacks Consensus Estimate of $6.70 billion. Also, total revenues rose 5% year over year largely as higher volumes offset lower net selling prices of several drugs. 

Amgen slashed the top end of its revenue guidance range for 2021 from $25.8-$26.6 billion to $25.8-$26.2 billion. However, the adjusted earnings per share guidance was raised from the range of $16.00 to $17.00 to $16.50 to $17.10.

On Oct 28, Gilead Sciences GILD reported earnings of $2.65 per share for the September-end quarter, up from $2.11 in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.72. Total revenues of $7.4 billion outpaced the Zacks Consensus Estimate of $6.2 billion and rose 13% from the year-ago quarter mainly on growing sales of Veklury.

Product sales are now projected at $26-$26.3 billion (earlier range: $24.4-$25 billion) primarily due to higher Veklury sales. Total product sales, excluding Veklury, are expected around $21.5 billion compared with $21.7 billion to $21.9 billion previously, primarily reflecting the longer-than-expected pandemic impact on the business.

Total Veklury sales are now estimated between $4.5 billion and $4.8 billion (earlier projection: $2.7-$3.1 billion), primarily reflecting the surge in COVID-19 hospitalizations in the third quarter.  Earnings per share are expected in the range of $7.90-$8.10, up from the previously expected range of $6.90-$7.25.

On Oct 20, Biogen BIIB reported third-quarter 2021 earnings per share of $4.77, which surpassed the Zacks Consensus Estimate of $4.15. Earnings slid 15.4% year over year on lower revenues. Sales of the company totaled $2.78 billion, down 18% (both actual and constant currency basis) from the year-ago quarter. Sales, however, surpassed the Zacks Consensus Estimate of $2.68 billion. The company saw softer sales of Tecfidera and Spinraza.

Biotech ETFs in Focus

In the current scenario, we believe it is prudent to discuss a few ETFs with a relatively wider exposure to the companies discussed above.

iShares Biotechnology ETF IBB

This fund seeks to track the investment results of an index composed of U.S.-listed equities in the biotechnology sector. It comprises 268 holdings, with the companies mentioned above taking about 17.9% of the fund. It has AUM of $10.53 billion and charges a fee of 45 basis points a year. IBB has returned about 2.8% since Oct 19 (as of Nov 4). The fund carries a Zacks ETF Rank #1 (Strong Buy), with a High-risk outlook.

VanEck Biotech ETF BBH

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, with the concerned companies having 18.6% weight in the fund. Its AUM is $592.6 million and expense ratio is 0.35%. BBH has returned around 0.1% since Oct 19 (as of Nov 4). The fund currently carries a Zacks ETF Rank #3 (Hold), with a High-risk outlook (read: Take a Look at the Top-Performing Biotech ETFs YTD).

SPDR S&P Biotech ETF XBI

The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It holds about 187 securities in its basket and puts some weight in-focus companies. Its AUM is $7.99 billion and expense ratio is 0.35%. XBI has gained around 7.7% since Oct 19 (as of Nov 4). The fund carries a Zacks ETF Rank #2 (Buy), with a High-risk outlook.

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Biogen Inc. (BIIB): Free Stock Analysis Report
 
Amgen Inc. (AMGN): Free Stock Analysis Report
 
Gilead Sciences, Inc. (GILD): Free Stock Analysis Report
 
iShares Biotechnology ETF (IBB): ETF Research Reports
 
SPDR S&P Biotech ETF (XBI): ETF Research Reports
 
VanEck Biotech ETF (BBH): ETF Research Reports
 
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