Healthcare Business

The Top Biotech ETFs to Watch in 2020

Chris Lange

Companies in the biotech industry face an incredible amount of risk while getting their drugs to market. A study coming back negative or a candidate not being approved could crush a company. On the other hand, a positive clinical trial, or even an update from the U.S. Food and Drug Administration (FDA), could send shares skyrocketing.

On a company by company basis, this makes investing in biotechs somewhat tricky. However, there is an investment strategy that makes this process much easier.

To mitigate this risk and concern about picking the winners or the losers within the biotech (or any) industry, exchange-traded funds offer a sampling and exposure to this market without an all-or-none risk in any single company’s stock. As the saying goes: “There’s an ETF for that strategy.” ETF Database has collected much of the information about these ETFs, among others, and made it easily accessible for those looking to get into the game. Investors can use a number of ETFs to invest in a risky biotech industry.

iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) has been around since February 2001, and it aims to track the Nasdaq Biotechnology Index. This fund seeks to track the investment results of an index composed of biotechnology and pharmaceutical equities listed on the Nasdaq. Note that this is the largest biotech ETF, with $7.59 billion in assets under management. Its overall expense ratio is 0.47%, and it posted gains of over 22% in 2019. This ETF has a total of 218 holdings. The top 10 holdings include a mix of large-cap domestic biotech companies:

  1. Amgen (8.14%)
  2. Gilead (7.72%)
  3. Vertex Pharmaceuticals (6.75%)
  4. Biogen (6.35%)
  5. Illumina (5.75%)
  6. Regeneron Pharma (4.02%)
  7. Alexion Pharmaceuticals (2.89%)
  8. Seattle Genetics (2.33%)
  9. Incyte (2.24%)
  10. Biomarin Pharmaceutical (1.83%)

SPDR S&P Biotech ETF (NYSEARCA: XBI) has been around since February 2006 and aims to track the S&P Biotechnology Select Industry Index. This fund seeks to provide exposure to the biotechnology segment of the S&P. It has $4.37 billion in assets under management. Its overall expense ratio is 0.35%, and it traded up 30% over the course of 2019. This fund has 127 holdings. The top 10 holdings include a smattering of U.S. biotechs in the S&P 500:

  1. Exact Sciences (1.85%)
  2. Biomarin Pharmaceuticals (1.77%)
  3. Mirati Therapeutics (1.75%)
  4. Global Blood Therapeutics (1.73%)
  5. AbbVie (1.72%)
  6. Amgen (1.72%)
  7. Medicines Co. (1.70%)
  8. Sage Therapeutics (1.70%)
  9. Vertex Pharmaceuticals (1.69%)
  10. Intercept Pharmaceuticals (1.68%)

First Trust NYSE Arca Biotechnology Index Fund (NYSEARCA: FBT) has been around since June 2006 and aims to track the NYSE Arca Biotechnology Index. The fund targets biopharma companies involved with recombinant DNA technology, molecular biology, genetic engineering, monoclonal antibody-based technology, lipid/liposome technology and genomics. It has $1.81 billion in assets under management, its overall expense ratio is 0.57% and it gained over 19% in 2019. This ETF has 31 holdings. The top 10 include mostly domestic biopharma firms:

  1. Intercept Pharmaceuticals (5.16%)
  2. Sarepta (4.26%)
  3. Agios Pharmaceuticals (4.07%)
  4. Alnylam Pharmaceuticals (3.86%)
  5. Biogen (3.79%)
  6. Seattle Genetics (3.64%)
  7. Regeneron Pharmaceuticals (3.52%)
  8. Vertex Pharmaceuticals (3.48%)
  9. Biomarin Pharmaceuticals (3.44%)
  10. Nektar Therapeutics (3.44%)

VanEck Vectors Biotech ETF (NASDAQ: BBH) has been around since December 2011, and it aims to track the MVIS US Listed Biotech 25 Index. This ETF seeks to track the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. It was last seen to have $362.6 million in assets under management. Its overall expense ratio is 0.35%, and it traded up nearly 26% in 2019. This fund has a total of 25 holdings. The top 10 holdings include mostly domestic biotech firms:

  1. Amgen (12.12%)
  2. Gilead (6.83%)
  3. Allergan (5.99%)
  4. IQVIA Holdings (5.38%)
  5. Illumina (5.04%)
  6. Exact Sciences (4.99 %)
  7. Biogen (4.98%)
  8. Regeneron Pharmaceuticals (4.94%)
  9. Vertex Pharmaceuticals (4.93%)
  10. Alexion Pharmaceuticals (4.38%)