From Sweta Jaiswal : President Trump’s latest move to raise the tariffs to 25% from 10% on $200 billion of Chinese goods might have ‘trumped’ hopes of many investors waiting for a truce between the two largest economies. However, amid this political conundrum, the biotech industry has kept its promise for solid returns so far. The rally in some major biotechnology indexes reflects the same. In this context, the NASDAQ Biotechnology Index has returned 11.5% year to date.
Increasing M&A deals, growing AI dominance and favorable regulatory tidings continue to boost the biotech market.
Let’s take a look at some big biotechnological earnings releases and see if these can leave an impact on ETFs exposed to the space.
Earnings in Focus
On Apr 30, Amgen (AMGN – Free Report) reported first-quarter 2019 earnings of $3.56 per share, which beat the Zacks Consensus Estimate of $3.45. Earnings increased 3% year over year helped by a lower share count as sales were weak in the quarter. Total revenues of $5.56 billion in the quarter were almost in line with the Zacks Consensus Estimate and flat year over year.
The company raised the low end of its previously issued sales and earnings guidance for 2019. The company expects revenues in the range of $22.0-$22.9 billion versus $21.8-$22.9 billion previously. Adjusted earnings per share are anticipated in the range of $13.25-$14.30 versus $13.10-$14.30 expected previously. Shares dipped about 1.2% since reporting earnings (as of May 3, 2019).
On May 2, Gilead Sciences (GILD – Free Report) reported mixed results for the first quarter of 2019 wherein earnings surpass expectations but revenues missed the same. Gilead delivered earnings of $1.76 per share in the first quarter, up from $1.48 a year ago. The bottom line also beat the Zacks Consensus Estimate of $1.62. Total revenues of $5.28 billion lagged the Zacks Consensus Estimate of $5.31 billion but inched up 3.8% year over year.
Gilead continues to expect net product sales of $21.3-$21.8 billion. Adjusted R&D and adjusted SG&A expenses are projected at $3.6-$3.8 billion and $3.9-$4.1 billion, respectively. Adjusted product gross margin is anticipated at 85-87%. The stock has gained 2.3% since reporting earnings (as of May 3, 2019).
On Apr 24, Biogen reported first-quarter 2019 earnings per share of $6.98, which beat the Zacks Consensus Estimate of $6.84. Earnings rose 15% year over year, backed by higher revenues and a lower share count due to share buybacks in the quarter. Sales came in at $3.49 billion, up 11% from the year-ago quarter. Sales also beat the Zacks Consensus Estimate of $3.38 billion. Revenue growth was principally driven by higher sales of Spinraza and increased contribution from biosimilars. The stock has gained 0.4% since reporting earnings (as of May 3, 2019).
On Apr 25, Alexion Pharmaceutical posted first-quarter 2019 adjusted earnings of $2.39 per share, which increased 42.3% from the year-ago quarter’s $1.68. Earnings also beat the Zacks Consensus Estimate of $2.19. Strong product revenues drove the bottom line in the quarter. Revenues rose 22.6% year over year to $1.140 billion and exceeded the Zacks Consensus Estimate of $1.112 billion. Revenues were driven by increased sales of Soliris, Strensiq and Kanuma.
The company raised its revenue and earnings guidance for 2019. The company expects earnings per share to be $9.25-$9.45, up from the previous guidance of $9.10-$9.30. Alexion projects revenues of$4.68-$4.75 billion, up from the prior outlook of $4.63-$4.70 billion. The stock has gained 5.1% since reporting earnings (as of May 3, 2019).
Biotech ETFs in Focus
In the current scenario, we believe it is prudent to discuss the following ETFs that have relatively high exposure to the companies discussed.iSharesNasdaq Biotechnology ETFThis fund seeks to provide exposure to U.S. biotechnology stocks and tracks the NASDAQ Biotechnology Index. It comprises 222 holdings with the above-mentioned companies, taking about 26.3% of the fund. It has AUM of $7.71 billion and charges a fee of 47 basis points a year. The fund carries a Zacks ETF Rank #2 (Buy) with a High risk outlook.
VanEck Vectors Biotech ETFThe 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 23.6% weight in the fund. Its AUM is $392.9 million and expense ratio is 0.35%. The fund carries a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
ProShares Ultra Nasdaq Biotechnology ETF
The ProShares Ultra Nasdaq Biotechnology seeks daily investment results, before fees and expenses, that match twice the daily performance of the NASDAQ Biotechnology Index. It holds about 220 securities in its basket and puts about 25.9% weight in the in-focus companies. Its AUM is $261.8 million and expense ratio is 0.95%.
First Trust Amex Biotechnology Index
The fund measures the performance of a cross section 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 with the concerned companies having 13.5% weight in the fund. Its AUM is around $3 billion and expense ratio is 0.56%. The fund carries a Zacks ETF Rank #2 with a High risk outlook.
The iShares Nasdaq Biotechnology ETF (IBB) was trading at $105.84 per share on Wednesday afternoon, up $0.21 (+0.20%). Year-to-date, IBB has declined -0.87%, versus a 8.61% rise in the benchmark S&P 500 index during the same period.
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