Biotech ETFs Stage Solid Comeback at the Start of 2024

The biotech space staged a strong comeback at the start of 2024, with many stocks and ETFs scaling new one-year highs. The gains are being driven by multibillion-dollar deals, upbeat clinical results and cutting-edge medical advances like CRISPR gene-editing hitting prime-time.

In particular, SPDR S&P Biotech ETF XBI, Vaneck Biotech ETF BBH, iShares Biotechnology ETF IBB, iShares Biotechnology ETF IBBQ and Virtus Lifesci Biotech Products ETF BBP have hit new 52-week highs (read: 5 Top-Ranked ETF Winners of December With More Room for Gains).

Series of Deals

Last month, there were four major acquisitions — Bristol Myers Squibb's BMY purchase of Karuna Therapeutics (KRTX) for $14 billion and Roche's (RHHBY) acquisition of Carmot Therapeutics for $3.1 billion, a significant move in the highly competitive obesity market. Bristol Myers also proposed the $4.1 billion acquisition of RayzeBio (RYZB), while AstraZeneca (AZN) concluded a deal to acquire Gracell Biotechnologies (GRCL) for an estimated $1.2 billion. AbbVie (ABBV) executed two large-scale transactions totaling approximately $18.8 billion within a brief period of seven days.

This trend of aggressive acquisitions continued into early January. Johnson & Johnson JNJ announced its $2 billion acquisition of Ambrx (AMAM), focusing on cancer treatment, particularly targeted chemotherapy through antibody-drug conjugates. Merck MRK followed suit with an $860 million deal for Harpoon Therapeutics (HARP). Meanwhile, Novartis (NVS) clinched a deal with privately held Calypso Biotech, a firm exploring treatments for autoimmune diseases.

Regulatory Approvals Win

A flurry of regulatory approvals has been driving biotech stocks higher. Crispr Therapeutics (CRSP) achieved a milestone by gaining FDA approval for its groundbreaking CRISPR-based gene-editing drug. Vertex Pharmaceuticals (VRTX) made significant progress with its non-opioid pain treatment and Moderna (MRNA) soared due to promising results for its Merck-partnered cancer vaccine in melanoma patients (read: Healthcare ETFs Start 2024 on a Positive Note).

Emerging Opportunities in Weight-Loss Drug Treatments

The landscape of obesity treatment is experiencing a significant transformation, characterized by promising developments and lucrative potential.

The new year has been marked by noteworthy advancements from Eli Lilly (LLY) and Novo Nordisk (NVO) in the realm of obesity management. Eli Lilly initiated a direct-to-consumer platform, facilitating connections between patients and independent healthcare providers, while ensuring support and streamlined drug delivery via third-party pharmacies. Novo Nordisk collaborated with Omega Therapeutics (OMGA) to explore novel obesity treatments and partnered with Cellarity, a private firm, to address a specific type of steatohepatitis linked to obesity.

ETFs in Focus

SPDR S&P Biotech ETF (XBI)

SPDR S&P Biotech ETF offers exposure to the biotech corner of the healthcare sector by tracking the S&P Biotechnology Select Industry Index. It holds 124 stocks in its basket with modest exposure across various securities. SPDR S&P Biotech ETF has amassed $6.8 billion in its asset base and charges 35 bps in annual fees. It trades in an average daily volume of 11.3 million shares and has a Zacks ETF Rank #3 (Hold).

VanEck Vectors Biotech ETF (BBH)

VanEck Vectors Biotech ETF offers exposure to 24 companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment by tracking the MVIS US Listed Biotech 25 Index. VanEck Vectors Biotech ETF has amassed $480 million in its asset base and charges 35 bps in fees per year. It has a Zacks ETF Rank #3 with a High risk outlook (read: Time to Buy Moderna-Heavy ETFs on Vaccine Optimism?).

iShares Biotechnology ETF (IBB)

iShares Biotechnology ETF provides exposure to 227 U.S. biotechnology and pharmaceutical companies by tracking the NYSE Biotechnology Index. IBB is the most popular fund in the biotech space, with an AUM of $7.6 billion and an expense ratio of 0.45%. iShares Biotechnology ETF has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

Invesco Nasdaq Biotechnology ETF (IBBQ)

Invesco Nasdaq Biotechnology ETF follows the Nasdaq Biotechnology Index and holds 226 stocks in its basket. It has been able to manage assets worth $21.2 million and trades in average daily volume of 16,000 shares. Invesco Nasdaq Biotechnology ETF charges 19 bps in annual fees and has a Zacks ETF Rank #2.

Virtus LifeSci Biotech Products ETF (BBP)

Virtus LifeSci Biotech Products ETF follows the LifeSci Biotechnology Products Index, which measures the performance of biotechnology companies with at least one drug therapy approved by the FDA. Holding 57 stocks, Virtus LifeSci Biotech Products ETF has accumulated AUM of $17.4 million and charges 79 bps in fees per year. It trades in a volume of 1,000 shares a day on average and has a Zacks ETF Rank #3 with a High risk outlook.

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Bristol Myers Squibb Company (BMY) : Free Stock Analysis Report

Johnson & Johnson (JNJ) : Free Stock Analysis Report

Merck & Co., Inc. (MRK) : 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

Virtus LifeSci Biotech Products ETF (BBP): ETF Research Reports

Invesco Nasdaq Biotechnology ETF (IBBQ): ETF Research Reports

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