Markets

Biotech Sees Better-than-Expected Earnings: ETFs in Focus

Not too long ago, the biotech stocks were battling with the growing rhetoric over drug prices led by Democratic Presidential candidate Hillary Clinton's tweet on drug price limits and need for higher regulatory scrutiny. The incident led to a huge sell-off in the sector and led Nasdaq Biotechnology Index to plunge 16.8% from its mid-July high (as of November 5, 2015) (read: How Hillary Clinton Crushed Biotech ETFs with One Tweet ).

However, the recent quarterly results depicted that the biotech sector held up well as all of them delivered better-than-expected earnings while most of them beat the top-line expectations and raised their outlook. Notably, the Nasdaq Biotechnology Index is still up 9.1% in the year-to-date timeframe despite the fall from its July summit.

The upside was mainly driven by new drug launches, aging demographics, continued increase in health care spending, merger and acquisition activities, expansion into emerging markets, cost-reduction measures, and the Affordable Care Act or Obamacare. Below we have highlighted some major biotech earnings that really drive the sector's outlook (read: The Comprehensive Guide to Biotech ETFs ).

Biotech Earnings in Detail

Biogen Inc. ( BIIB ) reported third-quarter 2015 earnings per share of $4.48 that were higher than the Zacks Consensus Estimate of $3.83 and 18.2% above the year-ago level. Revenues came in at $2.778 billion, well above the Zacks Consensus Estimate of $2.663 billion and grew 10.6% from the year-ago quarter. The company raised its revenue and earnings outlook for 2015. It now expects earnings per share of $16.20-$16.50 on revenue growth of 8-9% compared with the earlier guidance of $15.50-$15.95 earnings per share on revenue growth of 6-8%.

Gilead Sciences, Inc. ( GILD ) posted third-quarter adjusted earnings of $3.19 per share that topped the Zacks Consensus Estimate of $3.03 and the year-ago level of $1.79 per share. Total revenues of $8.3 billion surpassed the Zacks Consensus Estimate of $8.1 billion and were 37.3% above the year-ago level. The company raised its 2015 product sales guidance to the range of $30-$31 billion from the prior range of $29-$30 billion while it kept its adjusted product gross margin guidance unchanged at 88-90%.

Amgen Inc. ( AMGN ) reported third-quarter earnings of $2.72 per share, topping the Zacks Consensus Estimate of $2.38 and the year-ago earnings of $2.30. Total revenues increased 14% to $5,723 million, beating the Zacks Consensus Estimate of $5,311 million. The company also raised its previously issued guidance for 2015. It now expects to earn $9.95-$10.10 per share on total revenues of $21.4-$21.6 billion compared with the previous guidance of $9.55-$9.80 per share on total revenues of $21.1-$21.4 billion.

Alexion Pharmaceuticals, Inc. ( ALXN ) saw third-quarter adjusted earnings of 93 cents per share, beating the Zacks Consensus Estimate of 78 cents. However, earnings were lower than the year-ago level of $1.14 per share. Revenues escalated 20.1% year over year to $666.6 million but missed the Zacks Consensus Estimate of $668 million. The company raised its 2015 adjusted earnings per share guidance to the range of $4.92 to $4.97 from the previous guidance of $4.70 to $4.80. However, it expects revenues toward the lower end of the previously guided range of $2.60-$2.62 billion.

Celgene Corporation ( CELG ) posted third-quarter adjusted earnings of $1.12 per share, exceeding the Zacks Consensus Estimate of $1.09 and the year-ago level of 88 cents per share. Total revenue shot up 17.8% year over year to $2.3 billion in the quarter but slightly fell short of the Zacks Consensus Estimate of $2.4 billion. The company has reaffirmed its 2015 earnings guidance in the range of $4.75 to $4.85 per share while net product sales are still expected to be approximately $9-$9.5 billon for the year.

ETFs in Focus

Driven by better-than-expected results, ETFs having considerable exposure to these five biotech companies are surging (as of November 5, 2015) since we saw the first quarterly report from the group on October 21. Investors can consider investing in these funds as the sector is full of potential (see all the Healthcare ETFs here).

iShares Nasdaq Biotechnology ( IBB )

This is the top player in the biotech ETF space and tracks the NASDAQ Biotechnology Index, holding 143 securities in the basket. Celgene, Amgen, Gilead Sciences, Biogen and Alexion are placed among the top 10 holdings with a combined exposure of about 38% in the fund. The fund has an asset base of more than $8.6 billion and trades in an average volume of nearly 2.4 million shares a day. It has an expense ratio of 0.48% and returned 8.8% in the above mentioned timeframe. IBB currently has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Biotech ETFs Looking Attractive After Sell-Off ).

Market Vectors Biotech ETF ( BBH )

This fund follows the Market Vectors US Listed Biotech 25 Index and holds 26 securities in its basket. Gilead Sciences (15.97%), Amgen (11.78%), Celgene (11.27%) and Biogen (7.40%) take the top four spots in the fund while Alexion (4.56%) takes the seventh place. Together, they constitute more than half of the fund's assets. The fund has amassed nearly $705 million in its asset base and trades in moderate volumes of roughly 163,000 shares a day. The product charges an annual fee of 35 bps per year and returned 7.6% in the said timeframe. It currently carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BIOGEN INC (BIIB): Free Stock Analysis Report

GILEAD SCIENCES (GILD): Free Stock Analysis Report

AMGEN INC (AMGN): Free Stock Analysis Report

ALEXION PHARMA (ALXN): Free Stock Analysis Report

CELGENE CORP (CELG): Free Stock Analysis Report

ISHARES NDQ BIO (IBB): ETF Research Reports

MKT VEC-BIOTECH (BBH): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

GILDAMGNBIIB

Other Topics

Earnings ETFs

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More