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There is no denying that the pandemic has opened up opportunities for investment in the biotech sector by launching a race to introduce vaccines and treatment options. Moreover, increasing M&A deals, increasing AI dominance, and favorable regulatory news continue to work in favor of the biotech market.
Going forward, the FDA’s full approval of COVID-19 vaccines has increased confidence in enforcing vaccine mandates. Also, the unvaccinated population is now more likely to choose the vaccines. The nod with booster potions would likely boost people’s confidence in vaccination. This will accelerate the demand for coronavirus vaccines and boost the finances of the COVID-19 vaccine developer.
Let’s take a look at some of the big biotech earnings releases to see if they will impact the space-exposed ETFs.
Focus on profits
On November 2 Amgen AMGN reported third-quarter 2021 earnings of $4.67 per share, topping Zacks’ consensus estimate of $4.22. Profits are up 11% year over year, largely due to lower costs. Total revenue of $6.71 billion for the quarter exceeded the Zacks consensus estimate of $6.70 billion. Total revenue increased 5% y/y largely as higher volumes offset lower net selling prices for several drugs.
Amgen lowered the maximum revenue guidance range for 2021 from $25.8 to $26.6 billion to $25.8 to $26.2 billion. However, the adjusted earnings per share guidance has been raised from the range of $16.00 to $17.00 to $16.50 to $17.10.
On October 28, Gilead Sciences GILD reported earnings of $2.65 per share in the September-end quarter, up from $2.11 in the previous year’s quarter. The number exceeded Zacks’ consensus estimate of $1.72. Total revenue of $7.4 billion exceeded Zacks Consensus’ estimates of $6.2 billion, and was up 13% from the previous quarter last year, primarily due to Veklury’s sales growth.
Product sales are now expected to be in the $26.3 billion range (previous range: $24.4 – $25 billion) mainly due to higher sales of Veklury. Total product sales, excluding Veklury, are expected to be around $21.5 billion compared to $21.7 billion to $21.9 billion previously, primarily reflecting the longer-than-expected pandemic impact on business.
Veklury’s total sales are now estimated at between $4.5 billion and $4.8 billion (previous forecast: $2.7 – $3.1 billion), primarily reflecting the increase in COVID-19 hospital admissions in the third quarter. Earnings per share are expected in the range of $7.90 to $8.10, above the previously expected range of $6.90 to $7.25.
On October 20, Biogen Islamic International Investment Bank reported third-quarter 2021 earnings per share of $4.77, beating the Zacks consensus estimate of $4.15. Earnings declined 15.4% year over year due to lower revenue. The company’s total sales were $2.78 billion, down 18% (on an actual and constant currency basis) compared to the same quarter last year. However, sales exceeded Zacks Consensus’ estimate of $2.68 billion. The company saw sales of Tecfidera and Spinraza decline.
Biotech ETFs under the microscope
In the current scenario, we think it is wise to discuss a few ETFs with a relatively broader exposure to the companies discussed above.
iShares Biotechnology ETF IBB
This fund seeks to track the investment results of an index consisting of US-listed stocks in the biotechnology sector. It consists of 268 holdings, with the above companies holding approximately 17.9% of the fund. It has assets under management of $10.53 billion and charges a fee of 45 basis points annually. IBB is back around 2.8% since October 19 (as of November 4). The fund carries a Zacks ETF #1 rating (strong buy), with a risky outlook.
VanEck Biotech ETF BBH
The US-listed MVIS 25 Biotechnology Index tracks the overall performance of companies involved in the development, production, marketing, and sale of genetic analysis-based drugs and diagnostic equipment. About 25 securities are held in the stock basket, and the weight of the companies involved is 18.6% in the fund. AUM is $592.6 million and has an expense ratio of 0.35%. BBH is back about 0.1% since October 19 (as of November 4). The fund currently has a Zacks ETF #3 (Hold) rating, with a risky outlook (read: take a look at the best-performing biotech ETFs to date).
SPDR S&P Biotech ETF XBI
The fund seeks daily investment results, before fees and expenses, that match the S&P Biotechnology Select Industry Index. It maintains around 187 securities in its business basket and places some importance on the corporate focus. AUM is $7.99 billion and expense ratio is 0.35%. XBI has gained about 7.7% since October 19 (as of November 4). The fund has a Zacks ETF rating of #2 (Buy), with a Junk 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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