Despite M&A Spree, Biotech ETFs Slide On Mixed Earnings

This year, biotech stocks have seen their best-ever start to a year since 2012. A solid merger-and-acquisition momentum has been instrumental in this rally. However, the momentum slackened of late on mixed earnings for the fourth quarter (read: What's Behind the Biotech ETF Rally to Start 2019?).

In the past few days, biotech giants such as Amgen Inc. (NASDAQ:AMGN) , Gilead Sciences (NASDAQ:GILD) , Biogen Inc. (NASDAQ:BIIB) and Alexion Pharmaceuticals (NASDAQ:ALXN) have come up with earnings results, of which some offered downbeat guidance while some failed to top estimates on both lines.

Earnings in Focus

In late Jan, Amgen reported fourth-quarter 2018 earnings of $3.42 per share, which beat the Zacks Consensus Estimate of $3.26. Earnings increased 18% year over year driven by higher revenues, lower tax rate and reduced share count. Total revenues of $6.23 billion in the quarter surpassed the Zacks Consensus Estimate of $5.88 billion and increased 7% year over year.

Amgen issued its sales and earnings guidance for 2019, which indicates a decline from 2018 levels. The company expects revenues in the range of $21.8-$22.9 billion, indicating a decline from 2018 levels. The Zacks Consensus Estimate is currently at $22.87 billion. Adjusted earnings per share are anticipated in the range of $13.10-$14.30 in 2019, lower than the current Zacks Consensus Estimate of $14.45. The guided range indicates a decline from 2018.

In early-Feb, Gilead Sciences reported mixed results for the fourth quarter, wherein earnings missed expectations but revenues beat on the same. Gilead reported earnings of $1.44 per share in the fourth quarter, down from $1.78 in the year-ago quarter and missing the Zacks Consensus Estimate of $1.70. Total revenues of $5.79 billion beat the Zacks Consensus Estimate of $5.53 billion but declined 2.6% year over year.

Gilead expects net product sales of $21.3-$21.8 billion compared to the Zacks Consensus Estimate of $22.01 billion. For the first quarter of 2019, Gilead expects product sales to decline sequentially by 12-14%, primarily owing to the U.S. seasonal inventory patterns and buying patterns of public payers that negatively impact payer mix.

In early-Feb, Alexion Pharmaceuticals posted fourth-quarter 2018 adjusted earnings of $2.14 per share, which increased 45% from the year-ago quarter’s $1.48. Earnings also beat the Zacks Consensus Estimate of $1.83. Strong product revenues drove the bottom line in the quarter.

Revenues rose 24% year over year to $1.128 billion and exceeded the Zacks Consensus Estimate of $1.060 billion. Revenues were driven by increased sales of Soliris, Strensiq and Kanuma. For 2019, Alexion projects revenues of $4.63-$4.70 billion in 2019. The Zacks Consensus Estimate for earnings in 2019 is pegged at $8.78, while for sales it is $4.76 billion. Revenues for Soliris and Ultomiris are expected in the $3.97-$4.02 billion range.

In late January,Biogen reported fourth-quarter 2018 earnings per share of $6.99, which beat the Zacks Consensus Estimate of $6.72. Earnings rose 32.9% year over year, backed by higher revenues. Sales came in at $3.53 billion, up 7% from the year-ago quarter. Moreover, sales beat the Zacks Consensus Estimate of $3.39 billion.

For 2019,the company expects revenues of $ 13.6-$13.8 billion. Earnings per share are expected between $28.00 and $29.00.The Zacks Consensus Estimate for revenues and earnings is $13.65 billion and $28.20 per share, respectively.

Biotech ETFs, iShares Nasdaq Biotechnology ETF IBB, VanEck Vectors Biotech ETF (LON:BBH) and First Trust Amex Biotechnology Index (LON:FBT) all dipped in the past 10 trading days — period dotted with biotech releases.

Below, we have highlighted these popular ETFs with high exposure to the above-mentioned companies (see all Health Care ETFs here):

IBB

This fund tracks the NASDAQ biotechnology index. It has 223 holdings with 29.11% weight age to the mentioned four companies. It has an AUM of $8.0 billion and an expense ratio of 0.47%.

BBH

The fund tracks the MVIS US Listed Biotech 25 Index. It has a pool of 25 stocks with 25.19% weight to the mentioned four companies. It has an AUM of $403.1 million and an expense ratio 0.35%.

FBT

It tracks the equal-weighted NYSE Arca Biotechnology Index. There are 30 holdings in the basket with FBT holding 12.9%. AUM is $2.73 billion, while expense ratio is 0.56%.

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 >>