Coronavirus Makes Biotech ETFs Red Hot

The biotech space of the broader healthcare sector is currently the hottest of all segments buoyed by the COVID-19 pandemic. This is especially true as the rapidly spreading virus, which has now infected more than 2.4 million people globally and claimed 166,000 lives, has raised the need to diagnose the disease, leading to strong demand for testing kits.

The epidemic has also opened new doors for biotech companies, whether big or small, to discover and create vaccines and treatments related to the COVID-19 pandemic.

Testing Kits

Many companies have quickly developed tests receiving emergency use authorization (EUA) from the U.S. Food and Drug Administration (FDA). Abbott Labs ABT has launched the fastest COVID-19 test so far. The test, which runs on the company's widely used ID NOW molecular diagnostics platform, can deliver positive results within five minutes and negative results within 13 minutes. The company now plans to ramp up to 20 million antibody tests in June and beyond (read: Healthcare Stocks & ETFs to Gain on Coronavirus Test Progress).

Roche Holding (SIX:ROG) AG will start selling an antibody test for COVID-19 early next month while Thermo Fisher Scientific TMO aims to produce 100,000 diagnostic testing kits per day after receiving the CE mark in late March.

Treatment Progress

In particular, Gilead Sciences (NASDAQ:GILD) GILD has been on the forefront in the race to find a treatment. The company’s COVID-19 antiviral drug, remdesivir, has been gaining increased acceptance worldwide. Per the latest report, University of Chicago Medicine researchers saw “rapid recoveries” in 125 COVID-19 patients taking Gilead’s experimental drug remdesivir as part of a clinical trial. The New England Journal of Medicine showcased that 68% of 53 hospitalized patients who had received remdesivir on a compassionate-use basis showed clinical improvements (read: ETFs to Rise as Gilead Drug Shows Promise in Coronavirus Cure).

Other drug makers like Amgen AMGN and Regeneron Pharmaceuticals REGN are also showing strong potential to treat COVID-19. Amgen early this month partnered with Adaptive Biotechnologies to develop fully human neutralizing antibodies targeting the SARS-CoV-2 virus to prevent or treat COVID-19. Regeneron Pharmaceuticals’ rheumatoid arthritis drug, Kevzara, is currently in Phase 2/3 trial, which began on Mar 16 with up to 400 patients in 16 different cities. The early results of 21 patients treated in China have shown small improvements in fever and neuropathy of origin.

Vaccines Development

Though several companies are working on the vaccines for immunizing against the novel coronavirus, two firms are leading currently. Moderna MRNA initiated the first clinical testing in humans of an experimental COVID-19 vaccine - messenger RNA (mRNA) - in March in collaboration with the National Institute of Allergy and Infectious Diseases (NIAID). However, the Phase 1 clinical trial is expected to conclude on Jun 1, 2021. Meanwhile, Inovio Pharmaceuticals INO began a phase 1 clinical study of experimental COVID-19 DNA vaccine INO-4800 on Apr 6 (read: Biotech Stocks, ETFs to Gain on COVID-19 Vaccine & Drug Progress).

U.S. drug giant Pfizer PFE collaborated with BioNTech SE BNTX to jointly conduct clinical trials for the COVID-19 vaccine, mRNA, initially in the United States and Europe across multiple sites. They intend to initiate the first clinical trials as early as the end of Apr 2020, assuming regulatory clearance.

Against such a bullish backdrop, biotech ETFs are surging with many hitting new 52-week highs lately. We have highlighted them below:

ARK Genomic Revolution Multi-Sector ETF ARKG

This is an actively managed ETF, focusing on companies likely to benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments plus improvements and advancements in genomics into their business. With AUM of $679.5 million, the fund holds 34 stocks in its basket and has 0.75% in expense ratio. It trades in average daily volume of 209,000 shares. It hit new 52-week high of $39.32, having gained nearly 43% in a month (read: 10 ETFs Up More Than 30% in a Month).

VanEck Vectors Biotech ETF BBH

This fund offers exposure to 25 large biotechnology corporations by tracking the MVIS US Listed Biotech 25 Index. It has amassed $385.1 million in its asset base and charges 35 basis points in fees per year. The ETF sees a light volume of 21,000 shares per day on average and has a Zacks ETF Rank #2 (Buy) with a High risk outlook. It hit new 52-week high of $153.50, having gained nearly 32.2% in a month.

iShares Nasdaq Biotechnology ETF IBB

This fund provides exposure to 211 U.S. biotechnology and pharmaceutical companies by tracking the Nasdaq Biotechnology Index. It is the most-popular fund in the biotech space with AUM of $8 billion and average daily volume of 3.2 million shares. IBB charges 47 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook. It reached a new high of $128.46, having gained nearly 29.5% in a month.

First Trust NYSE Arca Biotechnology Index Fund FBT

This fund follows the NYSE Arca Biotechnology Index, which measures the performance of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. It holds about 31 securities in its basket and charges 57 bps in annual fees. It has accumulated $1.8 billion in its asset base and trades in a moderate volume of more than 100,000 shares a day. FBT has a Zacks ETF Rank #3 with a High risk outlook. It has reached new high of $157.80, having gained more than 34% in a month (read: Bull Market Turns 11: 5 ETF Winners).

iShares Evolved U.S. Innovative Healthcare ETF IEIH

This actively managed ETF employs data science techniques to identify companies with exposure to the innovative healthcare sector. Holding 229 stocks in its basket, the product has accumulated $10.1 million in its asset base and trades in a meager volume of 6,000 shares per day on average. It charges 18 bps in annual fees and hit new 52-week high of $29.24, having gained more than 29% in a month.

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