The biotech industry’s trading patterns are unstable and investors need to be prepared to commit to the sector for the long term. Alnylam’s share price had more than doubled by August, but the really big news for the biotech came in September. On Sept. 20, the company reported positive results from a late-stage study of RNAi drug patisiran in patients with hereditary ATTR amyloidosis with polyneuropathy. Alnylam is now pursuing U.S. and regulatory approval for the drug. That proved to be just the beginning of good news for XOMA related to product licensing deals.

It’s estimated that upwards of 90% of clinical trials ultimately fail. This aspect is what makes investing in unproven biotech companies, that sometimes only have a handful of candidate drugs in the development stage, particularly risky. The fund is the largest on our list, with more than $9 billion in assets under management (AUM). This means that investors will have little trouble buying and selling shares in the fund. Its expense ratio is 0.45%, equivalent to $4.50 for each $1,000 invested.

The third major biotech ETF that’s out there is the SPDR S&P Biotech ETF (XBI, $131.35) – an “equal weight” offering from SPDR with more than $7 billion in assets at present. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. For example, a 2x leveraged biotech ETF will gain 2% on the day if the index it tracks is up 1%. Check out the following list of different types of biotech ETFs (you can click on each ticker for access to a host of insightful charts for each of these biotech ETFs). With biotech ETFs there are a number of different categories, but generally they fall into either a broad / general biotech ETF or those that focus on a particular niche of the biotech sector. In this regard, BBH side steps that issue by focusing more on the largest established names in the industry, that have achieved success with a commercialized product and diversified pipeline.

The number of holdings in the SPDR S&P Biotech ETF currently stands at 102. While the iShares Nasdaq Biotechnology gives greater weight to biotechs with larger market caps, the SPDR S&P Biotech ETF maintains more equalized weights for all stocks. As a result, the ETF’s top holding, BioMarin Pharmaceutical, makes up only 1.72% of total assets held. The iShares NASDAQ Biotechnology ETF was launched on February 5, 2001, and tracks 264 holdings. This iShares ETF is a diversified fund in that it provides exposure to biotechnology, pharmaceutical and life science tools and services.

The world’s largest biotech and pharmaceutical companies are constantly racing to find new vaccines, treatments and cures. Generally speaking, actively managed ETFs like this get a bad rap. Countless articles have been written about how low-cost index funds regularly outperform managers who claim their costly “special sauce” makes for a better approach to investing. Right now, biotech stocks Biogen (BIIB) and Illumina (ILMN) have the highest weightings based on PBE’s methodology.

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BBH tracks the MVIS US Listed Biotech 25 Index, an index of companies that develop, produce, market, and sell drugs based on genetic analysis and diagnostic equipment. The fund holds predominantly large-cap stocks and more than 90% of its holdings are U.S.-based companies. If you’re looking to get exposure primarily to large biotech stocks, the iShares Nasdaq Biotechnology ETF is probably your best alternative.

• Its overarching investment goal is to track NASDAQ-listed companies focused on these areas.
• One bright side to all of that selling is that a handful of high-quality biotech stocks are currently trading for attractive prices.
• The award for best-performing biotech stock of all in 2017 goes to Marinus Pharmaceuticals.
• Biotech stocks can be risky investments, especially if years of research and testing ends up for not.

If all of that wasn’t bad enough, a U.S. district court recently issued an injunction that threatens to inhibit the company from selling its hopeful blockbuster cholesterol-reducer Praluent in the United States. These ETFs own companies that focus on areas including biological services, and developing and commercializing products based on genetic engineering and genetic analysis. However, it’s important to note that sector ETFs are still often riskier than S&P 500 or total stock market ETFs — even the largest sector ETFs won’t offer the full diversification benefits of a broad market fund. ALPS Medical Breakthroughs ETF (SBIO, $48.17) is a smaller exchange-traded fund when it comes to both the brand name of the asset manager and the total funds under management. But SBIO is actually one of the more interesting options on this list of biotech ETFs because of its wide reach, as well as its focus on lesser-known names in the industry. If you are interested in this specific corner of biotech, IDNA offers a way to do so without picking individual stocks.

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In the last 12 months, for instance, this Invesco fund has surged 28% – much better than two of the biggest biotech ETFs IBB and XBI, both of which are “only” up about 16% in the same period. This “all your eggs in one basket” approach is certainly higher risk, but it has also resulted in significantly higher rewards this year. Consider that the prior XBI fund is actually down slightly on the year, while BBH is up financial instrument types an impressive 16.7%. VanEck Vectors Biotech ETF (BBH, $198.05) is slightly smaller than the biotech ETFs we’ve seen so far, but still quite established with more than $560 million in customer funds. That means while you do have a smattering of mature biotechs, you also get plenty of exposure to lesser-known picks with high potential – like Intellia Therapeutics (NTLA), which has surged more than 266% year-to-date.

Experts believe that mergers and acquisitions could be a highlight for the pharmaceutical industry in the coming years. PricewaterhouseCoopers (PwC) anticipates a series of deals falling within the $20 billion to $40 billion range in 2023, largely driven by the robust financial positions and liquidity of pharmaceutical companies. Experts in the field identify oncology and immunology as areas with substantial growth potential, which also emphasizes the investment opportunities in the pharmaceutical industry. The iShares Biotechnology ETF (IBB -0.16%) attempts to track the results of an index that includes all U.S.-listed stocks in the biotechnology sector. The iShares Biotechnology ETF (IBB, $161.43) is the leader among biotech ETFs, with about $10 billion in assets under management.

His work has appeared in numerous respected finance outlets, including CNBC, the Fox Business Network, the Wall Street Journal digital network, USA Today and CNN Money. Though only comprised of about 30 stocks, which range from Big Pharma giants like AstraZeneca (AZN) to mature biotechs like Regeneron Pharmaceuticals. Also included in CNCR’s holdings are small, unprofitable start-ups like Atara Biotherapeutics (ATRA) that are still wholly concerned with researching potential cures without an established product pipeline yet. Close behind IBB in terms of largest biotech ETFs is the ARK Genomic Revolution ETF (ARKG, $88.70).

Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. It attempts to generally track the investment results of the S&P Biotechnology Select Industry Index and has an expense ratio of 0.35%, which is relatively low compared with other biotech ETFs. Founded in 1993 by brothers Tom and David Gardner, The Motley https://bigbostrade.com/ Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Several biotech ETFs pay dividends with the amount depending on the stocks that are held in the portfolio. That said, most biotech ETFs that do pay dividends have a dividend yield less than 1%.

However, when it comes to the makeup of the portfolio itself, BBH is significantly smaller with just 25 total stocks right now – and about 20% in the top three positions, which, similar to IBB, are AMGN, GILD and MRNA. Biotechnology might not be at the top of every investor’s mind, but biotech exchange-traded funds (ETFs) should always at least be on your radar. The First Trust NYSE Arca Biotech ETF launched in June 2006, less than five months after the inception of the SPDR S&P Biotech ETF.

Is there an ETF that tracks biotech stocks?

Biotech exchange-traded funds let you invest in a basket of health care companies through a single investment. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor.

• Jeff Reeves writes about equity markets and exchange-traded funds for Kiplinger.
• His work has appeared in numerous respected finance outlets, including CNBC, the Fox Business Network, the Wall Street Journal digital network, USA Today and CNN Money.
• The results were encouraging enough for management to reaffirm its 2020 goals of $21 billion in revenue and EPS of at least $13.
• Many of these companies are small- and mid-caps with high growth potential.
• With the XBI, the fund features a modified equal-weighting methodology adjusted for trading liquidity thresholds.

The company began the year with a market cap of a little over $200 million and is on track to finish with a valuation topping $1.4 billion. Regeneron Pharmaceuticals (REGN -0.09%) is a former biotech darling that has gone through a bit of a rough patch. The company announced two major clinical setbacks in 2016 that caused investors concerns. To add insult to injury, the FDA also issued a surprise rejection for its rheumatoid arthritis drug candidate sarilumab, over manufacturing concerns.

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Plus, you can only buy mutual funds through a brokerage or directly from the issuer. Hundreds of biotech companies are hard at work developing innovative therapies. Some could even be game changers in preventing and treating diseases. Nektar announced positive clinical results in November for two pipeline candidates — mu-opioid receptor agonist NKTR-181 and cancer drug NKTR-214. Sangamo Therapeutics ranks as the third best biotech stock of 2017, with a sizzling gain of more than 440%.

The investment objective of the ETF is to replicate as closely as possible the investment results of the NYSE Arca Biotechnology Index. Here’s what makes these ETFs ones to consider for investors looking to profit from the biotech industry. Founded on May 28, 2015, the Direxion Daily S&P Biotech Bull 3x Shares ETF does not mirror an index.

Earlier this year, XOMA was a nano-cap stock valued around $25 million. It will probably end 2017 with a market cap of $275 million or more. When researching biotech ETFs, you can get a sense of their risk level by looking at their top 10 holdings, focusing primarily on those that are most heavily weighted. From there, take into consideration the market capitalization of these holdings.

How to Invest in Biotechnology (Updated

If you would prefer to not be as loaded up with bigger biotech stocks, the two other ETFs are probably better choices for you. The SPDR S&P Biotech ETF gives you more diversification, since it holds more than three times the number of stocks as the First Trust NYSE Arca Biotech ETF does. Also, if expenses are a big issue for you, the SPDR S&P Biotech ETF is your best pick. Since inception, the ETF has generated an average annual return of 15.07%. Over the past five years, it has produced an average annual return of 23.67%.

The key difference is that these ETFs hold only the stocks of companies that focus on biotechnology. Investing in an ETF comes with a cost beyond just the transaction charge that a brokerage might require. The expense ratio of an ETF is calculated by dividing the fund’s operating expenses by its average assets.

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