Biotech companies use or modify biological processes usually in order to create new pharmaceuticals or therapies. The biotech sector, is particularly hot right now as biotech companies around the world work diligently to discover and create potential vaccines and treatments related to the COVID-19 pandemic. Some of the most prominent biotech companies include Gilead Sciences, Inc. (GILD) and Amgen, Inc. (AMGN). One of the easiest ways to invest in biotech is through exchange-traded funds (ETFs). These funds have holdings in a large array of biotech companies, providing a well-diversified portfolio in one easy-to-execute trade. There are approximately 13 funds in the biotech ETF universe, not including inverse and leveraged funds.
Investing in the biotech sector can be daunting. The scientific and regulatory issues involved with gaining approval from the U.S. Food and Drug Administration (FDA) can be substantial, making it risky or difficult to predict what biotech investments will pay off. ETFs provide a method to invest in the sector without having to do as much research on each individual company. The best biotech ETF for April 2020 is the VanEck Vectors Biotech ETF (BBH). We examine the top 3 biotech ETFs below; note that due to the bear market, all three funds have reported negative performance over the past year, but these funds have dropped by the smallest amount. All figures are as of April 6, 2020.
- Performance over 1-year: -1.1%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 0.37%
- 3-Month Average Daily Volume: 24,269
- Assets Under Management: $320.0 million
- Inception Date: December 20, 2011
- Issuer: VanEck
BBH is a multi-cap fund tracking the MVIS US Listed Biotech 25 Index, a market cap-weighted index of U.S. pharmaceuticals companies. It's top three holdings are currently Amgen, the biopharmaceutical company and manufacturer of popular drugs Enbrel and Neulasta; Gilead Sciences, the biotechnology company specializing in antiviral drugs; and Allergan plc (AGN), the Irish-domiciled biopharmaceutical company.
- Performance over 1-year: -5.8%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.25%
- 3-Month Average Daily Volume: 3,667,113
- Assets Under Management: $6.4 billion
- Inception Date: February 5, 2001
- Issuer: iShares
The iShares Nasdaq Biotechnology ETF tracks the Nasdaq Biotechnology Index, a modified capitalization-weighted index of Nasdaq-listed biotech and pharmaceutical companies. The top holdings for IBB are Gilead Sciences; Vertex Pharmaceuticals, Inc. (VRTX), a biotech company best known for its cystic fibrosis treatments; and Amgen.
- Performance over 1-year: -6.0%
- Expense Ratio: 0.79%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 26,273
- Assets Under Management: $26.3 million
- Inception Date: December 16, 2014
- Issuer: Virtus
A micro-cap fund, the Virtus LifeSci Biotech Clinical Trials ETF focuses specifically on companies with a primary product offering in Phase 1, Phase 2, or Phase 3 clinical trial development stages. Because these companies are still developing their products, they are riskier investments than more mature companies with products out on the market. The trade off is that they also have a larger potential for growth. The fund's top holdings are Forty Seven, Inc. (FTSV), the immuno-oncology firm; Moderna, Inc. (MRNA), the messenger RNA drug development company; and CEL-SCI Corp. (CVM), the immunotherapy drug developer.