When it comes to biotech stocks, the investment climate hasn’t yet recovered from its peak two years ago. Indeed a glimpse of the first quarter performance of the top 10 electronic transfer funds (ETFs) focused on biotech stocks shows mostly declines in value that exceed that of a key bellwether of U.S. stock market activity.
The overall Standard & Poor’s 500 index, which tracks 500 of the largest U.S. public stocks, fell 9% during Q1 2023 compared with the first three months of 2022, from $4,530.41 on March 31, 2022, to $4,109.31 the same date this year.
However, six of the top 10 ETFs specializing in the stocks of biotechs and pharmaceutical companies showed even larger declines during the first quarter. Two ETFs finished with smaller declines and two others actually showed one-year increases in stock price.
The biggest year-over-year slump was recorded by the Direxion Daily S&P Biotech Bull 3X Shares (LABU), an ETF whose value plunged 69% from $15.67 on March 31, 2022, to $4.91 the same date this year.
LABU seeks daily investment results, before fees and expenses, of 300% of the performance of the S&P Biotechnology Select Industry Index, which includes U.S.-based biotechs. LABU has total assets of $958.6 million, making it the fifth-largest biotech ETF according to VettaFi, a provider of ETF and other data, analytics, and thought leadership for asset managers launched last year.
The second largest decline among top-10 ETFs was shown by the ARK Genomic Revolution ETF (ARKG), whose investments in companies within healthcare and other sectors “are focused on and are expected to substantially benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments and advancements in genomics into their business.”
ARKG lost about one-third of its value over the past year, tumbling 34.5% from $45.93 to $30.07. ARKG is the third largest biotech ETF with $1.929 billion in total assets.
“The companies held in ARKG may be leaders, enablers, or beneficiaries of technologies including: CRISPR, targeted therapeutics, bioinformatics, molecular diagnostics, stem cells, [and] agricultural biology,” the fund states on its website.
Eight ETFs down from Q1 2022
ARKG and LABU were two of eight ETFs to finish the first quarter with lower share prices than a year ago.
Not far behind ARKG among decliners was the iShares Genomics Immunology and Healthcare ETF (IDNA), the ninth largest biotech ETF with $144.36 million in total assets and a focus on developed and emerging market companies “that could benefit from the long-term growth and innovation in genomics, immunology, and bioengineering.” IDNA sank 32%, from $34.45 to $23.27.
Next with a year-over-year 18% decline was Global X Genomics & Biotechnology ETF (GNOM), which seeks to invest in companies that could potentially benefit from further advances in genomic science, such as companies involved in gene editing, genomic sequencing, genetic medicine/therapy, computational genomics, and biotechnology. GNOM—the eighth-largest biotech ETF at $203.4 million in total assets—went from $15.03 to $12.32.
The SPDR S&P Biotech ETF (XBI), the second-largest biotech ETF with $6.165 billion in total assets, focuses on investment results (before fees and expenses) that correspond generally to the total return performance of the S&P® Biotechnology Select IndustryTM Index. XBI fell 15% during the first quarter to $76.21 from $89.88.
ProShares Ultra Nasdaq Biotechnology (BIB), which pursues daily investment results (before fees and expenses) corresponding to twice the daily performance of the Nasdaq Biotechnology Index®, is the 10th largest biotech ETF with $105 million in total assets. BIB shrank 13% in the first three months of this year, from $62.03 to $54.18.
By contrast, the largest biotech ETF—the iShares Biotechnology ETF (IBB) with total assets of $8.094 billion—recorded only a 1% dip year-over-year, from $130.30 to $129.16. IBB focuses its investment on U.S.-listed biotech public companies. Its top five holdings include Gilead Sciences (accounting for 8.09% of the fund’s holdings as of December 31, 2022), Amgen (7.59%), Regeneron Pharmaceuticals (7.06%), Vertex Pharmaceuticals (also 7.06%), and Moderna (5.68%).
VanEck Biotech ETF (BBH) stayed practically flat, losing just four cents per share from $162.13 to $162.09. With $517.49 million in total assets, placing it at sixth largest, VanEck Biotech ETF aims 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. BBH is designed to replicate as closely as possible (before fees and expenses) the price and yield performance of MarketVector’s MVIS® US Listed Biotech 25 Index (MVBBHTR), which tracks the performance of the 25 largest and most liquid U.S. exchange-listed companies in the biotech industry.
The remaining two of the top 10 ETFs showed year-over-year gains. The largest increase over Q1 2022 was generated by First Trust NYSE Arca Biotech ETF (FBT), which climbed 4%, from $149.14 to $155.03.
Ranking fourth among ETFs with $1.482 billion in total assets, FBT focuses on replicating as closely as possible (before fees and expenses) the price and yield of the NYSE® Arca Biotechnology Index (BTK), designed to measure the performance of a cross-section of biotechs primarily involved in the use of biological processes to develop products or provide services. Those processes include, but are not limited to, recombinant DNA technology, molecular biology, genetic engineering, monoclonal antibody-based technology, lipid/liposome technology, and genomics.
Invesco Dynamic Biotechnology & Genome ETF (PBE) inched up 1%, from $62.03 to $62.77. The seventh largest biotech ETF with $255.35 million in total assets, PBE is based on the Dynamic Biotech & Genome Intellidex℠ Index, which consists of securities of 30 U.S. biotechnology and genome companies principally engaged in the research, development, manufacture and marketing, and distribution of biotech products, services, and processes. Also in the Index are companies that benefit significantly from scientific and technological advances in biotechnology and genetic engineering and research.
Leaders and laggards
- Apollomics (APLM) shares tumbled 33% on Monday, from $12.19 to $8.14, and dropped another 14% the following day to an even $7.00, despite not announcing any news or disclosing any information in regulatory filings. The declines come less than two weeks after the Foster City, CA, cancer drug developer completed a merger with a special purpose acquisition company (SPAC), Taiwan-based Maxpro Capital Acquisition. Following completion on March 30, Apollomics shares nearly quadrupled before finishing at $29.40, close to triple its initial post-SPAC value, but have largely skidded ever since.
- Creative Medical Technology Holdings (CELZ) shares surged 81% on Wednesday, from 48 cents ($0.484) to 88 cents ($0.875), after the company announced that it generated positive one-year follow-up data from an unspecified study assessing CELZ-001 in type 2 diabetes. The follow-up data showed an overall efficacy of 93% demonstrating at least a 50% reduction in insulin requirement in the 15 patients treated with CELZ-001; the study’s other 15 patients received optimized medical therapy. The Phoenix-based company said it planned to further develop the program and will present the findings at an upcoming endocrinology conference.
- SAB Biotherapeutics (SABS) shares nearly doubled, rocketing 98% on Thursday, from 38 cents ($0.3841) to 76 cents ($0.7589), after the FDA granted its Fast Track designation for the company’s lead pipeline candidate SAB-176, an immunotherapy being developed for Type A and Type B influenza in high-risk patients, including those with anti-viral resistant strains. Sioux Falls, SD-based SAB said it also received FDA guidance on advancing SAB-176 into its next development phase by launching a Phase IIb dose-range finding efficacy and safety trial in patients at high risk for developing severe disease.
- TG Therapeutics (TGTX) shares jumped 23% on Monday, from $15.48 to $19.01, and rose another 15% on Tuesday, to $21.93, after Cantor Fitzgerald analyst Prakhar Agrawal wrote in a research note a day earlier that sales of TG’s drug for relapsing multiple sclerosis, Briumvi™ (ublituximab-xiiy), multiplied to $3.3 million in March from $500,000 in February. That brought first-quarter sales to roughly $4 million, above forecasts that ranged from $2.5 million to $3.8 million. TG is based in New York. “We estimate that Briumvi is likely to meet/exceed the current first-quarter consensus revenue estimates,” Agrawal said in the note, according to Investor’s Business Daily.