Yahoo Finance 10 Best Performing Biotech ETFs in 2024
In this article, we discuss the 10 best performing biotech ETFs in 2024. If you want to skip our detailed introduction to the biotech industry and just want to take a look at some more ETFs, go directly to the 5 Best Performing Biotech ETFs in 2024.
Biotechnology is a challenging field, not ideal for the faint of heart. Companies within this sector often utilize biological components in their product development which require hefty investments. Consequently, biotechnology stocks are notorious for their high-risk levels, making them some of the most volatile assets in the stock market. The prices of these equities can experience dramatic fluctuations, influenced by the outcomes of Food & Drug Administration (FDA) clinical trials and the performance of their treatments in real-world scenarios. In 2020, the biotechnology industry gained significant attention amid the pandemic, particularly with the introduction of COVID-19 vaccines by companies like Pfizer Inc (NYSE:PFE), Moderna, Inc. (NASDAQ:MRNA) and Johnson & Johnson (NYSE:JNJ). However, as society adapted to living with COVID-19 and other economic and political issues came to the forefront, interest in biotech waned.
With that said, the Financial Times reports that in January of this year, drug developers amassed $6 billion in equity capital markets, marking the highest total since February 2021—when biotech stocks peaked. This uptick indicates a robust recovery from a challenging two-year period, during which many companies struggled financially, resulting in layoffs, halted projects, and, in some cases, closures. A key factor driving this resurgence in biotech investments is the overall improvement in stock market performance. After a period of volatility and declines, the stock market has stabilized and begun to exhibit signs of growth. This stability has bolstered investor confidence, prompting a renewed interest in the biotech sector. Notably, the SPDR S&P Biotech ETF (NYSE:XBI) has experienced a significant rebound, climbing 40% since October, underscoring investors' renewed enthusiasm for biotech stocks.
See also: 10 Biotech Stocks with Huge Potential
Amid increasing healthcare demands, there has been a notable emphasis on personalized medicine and innovative therapies, fueling the expansion of the biotech industry. Additionally, government initiatives aimed at modernizing regulations and improving reimbursement policies are further bolstering market growth. According to IQVIA, global spending on medications is projected to reach $2.30 trillion by 2028, with a compound annual growth rate (CAGR) of 5% to 8%. Oncology and obesity are expected to drive this growth, while spending on immunology may slow due to the introduction of biosimilars. Biotech is anticipated to represent 39% of total spending, surpassing $892 billion by 2028, with cell and gene therapies experiencing rapid growth rates. The integration of artificial intelligence (AI) in drug discovery and development has emerged as a transformative force, revolutionizing traditional approaches and enhancing efficiency throughout the pharmaceutical research and development (R&D) process. For example, NVIDIA Corporation (NASDAQ:NVDA) recently unveiled partnerships with Johnson & Johnson (NYSE:JNJ) to integrate generative AI into surgical procedures and with GE HealthCare Technologies Inc. (NASDAQ:GEHC) to bolster medical imaging capabilities.
To tap into the promising growth opportunities within the biotech sector, investors can consider ETFs that provide exposure to leading industry players such as Eli Lilly and Company (NYSE:LLY), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Amgen Inc. (NASDAQ:AMGN).
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Our Methodology
We compiled our selection of the best performing biotech ETFs by ranking the top 10 based on their 5-year share price performance as of April 20, 2024, arranging them in ascending order for clarity. Additionally, we've provided insights into the top holdings of each ETF to enhance understanding for potential investors.
10. SPDR S&P Biotech ETF (NYSE:XBI)
5-Year Share Price Performance as of April 20: -5.06%
The SPDR S&P Biotech ETF (NYSE:XBI) seeks to mirror the performance of the S&P Biotechnology Select Industry Index, offering exposure to the biotech sector within the S&P Total Market Index. With assets under management totaling $6,251.28 million as of April 18, the ETF diversifies across large, mid, and small-cap biotech stocks, featuring a gross expense ratio of 0.35%.
Exact Sciences Corporation (NASDAQ:EXAS) holds a prominent position within the SPDR S&P Biotech ETF (NYSE:XBI). Specializing in cancer screening and diagnostic tests, Exact Sciences Corporation (NASDAQ:EXAS) reported a Q4 GAAP EPS of -$0.27 and revenue of $647 million on February 21, surpassing Wall Street estimates by $0.21 and $7.3 million, respectively.
Insider Monkey's fourth-quarter database reveals bullish sentiment from 39 hedge funds toward Exact Sciences Corporation (NASDAQ:EXAS), down from 45 funds in the previous quarter.
Artisan Small Cap Fund made the following comment about Exact Sciences Corporation (NASDAQ:EXAS) in its Q3 2023 investor letter:
“Among our top detractors were Lattice Semiconductor, Shockwave and Exact Sciences Corporation (NASDAQ:EXAS). Exact Sciences is a leading provider of diagnostic testing and maker of the noninvasive colorectal cancer screening test Cologuard®. The stock was a top performer through the first half of the year but pulled back in Q3. The company reported strong financial results as 31% growth in screening revenues (mostly Cologuard®) drove an overall 19% revenue increase. However, screening revenues fell slightly short of elevated expectations and were not good enough to support the stock’s year-to-date outperformance. We continue to be bullish on Cologuard’s® long-term growth potential; the addressable market expanded significantly in 2021 when the United States Preventive Services Task Force lowered the recommended age for colorectal cancer screenings to 45 from 50. Our research indicates the lowered screening age expands the company’s addressable market by ~18 million unscreened individuals. We also believe meaningful long[1]term opportunities exist as the company develops additional high-value cancer tests.”
In addition to Eli Lilly and Company (NYSE:LLY), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Amgen Inc. (NASDAQ:AMGN), Exact Sciences Corporation (NASDAQ:EXAS) is a biotechnology stock that investors should look out for.
9. First Trust NYSE Arca Biotechnology Index Fund (NYSE:FBT)
5-Year Share Price Performance as of April 20: 1.16%
The First Trust NYSE Arca Biotechnology Index Fund (NYSE:FBT) seeks to replicate the performance of the NYSE Arca Biotechnology Index, which encompasses companies within two sub-industries: Biotech Therapeutics, focused on therapeutic treatments, and Biotech Tools & Diagnostics, centered on tools and processes supporting biotechnology practices. Established on June 19, 2006, the ETF holds a portfolio of 30 stocks and offers a gross expense ratio of 0.56%.
Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) is the biggest holding of the First Trust NYSE Arca Biotechnology Index Fund (NYSE:FBT). Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) is a biopharmaceutical company dedicated to discovering, clinically developing, and commercializing small molecule drugs primarily targeting intracellular signaling mechanisms in the central nervous system. On February 22, the company reported a Q4 GAAP EPS of -$0.30, surpassing market consensus by $0.15. Although revenue increased by 50.2% year-over-year to $132 million, it fell short of Street estimates by $3.67 million.
According to Insider Monkey’s fourth quarter database, 42 hedge funds expressed bullish sentiments toward Intra-Cellular Therapies, Inc. (NASDAQ:ITCI), compared to 37 funds in the preceding quarter. Kurt Von Emster’s VenBio Select Advisor holds the largest stake in the company, with 2.25 million shares valued at $161.5 million.
8. Tema Oncology ETF (NASDAQ:CANC)
5-Year Share Price Performance as of April 20: 2.85%
Tema Oncology ETF (NASDAQ:CANC) is an actively managed fund designed for long-term growth by investing in oncology companies. Established on August 14 of the previous year, the ETF boasts a portfolio of 47 stocks and assets under management totaling nearly $17.13 million as of April 18, 2024. Its gross expense ratio stands at 0.99%.
Leading the holdings of the Tema Oncology ETF (NASDAQ:CANC) is Merck & Co., Inc. (NYSE:MRK), a key player in the pharmaceutical industry, focusing on the development of medicines, vaccines, biologic therapies, and animal health products. As of March 11, analysts at Cantor Fitzgerald assigned a $135 price target and an Overweight rating to Merck & Co., Inc. (NYSE:MRK).
During the fourth quarter of 2023, 98 out of 933 hedge funds surveyed by Insider Monkey had invested in Merck & Co., Inc. (NYSE:MRK), with Fisher Asset Management, led by Ken Fisher, emerging as the largest shareholder with a $1.4 billion stake.
7. Invesco Biotechnology & Genome ETF (NYSE:PBE)
5-Year Share Price Performance as of April 20: 12.92%
Established on June 23, 2005, the Invesco Biotechnology & Genome ETF (NYSE:PBE) tracks the Dynamic Biotech & Genome Intellidex Index, which comprises 30 US-based biotechnology and genome companies primarily engaged in research, development, manufacturing, marketing, and distribution of biotechnological products and services. As of April 18, the total expense ratio of the Invesco Biotechnology & Genome ETF (NYSE:PBE) was recorded at 0.58%.
Among the top holdings of the Invesco Biotechnology & Genome ETF (NYSE:PBE) is Neurocrine Biosciences, Inc. (NYSE:NBIX), a pharmaceutical company dedicated to discovering, developing, and marketing treatments for neurological, neuroendocrine, and neuropsychiatric disorders worldwide. On February 7, the company reported a Q4 non-GAAP EPS of $1.54, surpassing market estimates by $0.03, alongside a revenue of $515.2 million, slightly below Street expectations by $3.19 million.
According to Insider Monkey’s fourth quarter database, 55 hedge funds maintained a bullish stance on Neurocrine Biosciences, Inc. (NYSE:NBIX), consistent with the prior quarter.
Like Eli Lilly and Company (NYSE:LLY), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Amgen Inc. (NASDAQ:AMGN), Neurocrine Biosciences, Inc. (NYSE:NBIX) is one of the best biotechnology plays to consider.
6. Tema Cardiovascular and Metabolic ETF (NASDAQ:HRTS)
5-Year Share Price Performance as of April 20: 14.54%
One of the best performing biotech ETFs out these, the Tema Cardiovascular and Metabolic ETF (NASDAQ:HRTS) is an actively managed fund designed to achieve long-term capital growth by investing in companies leading the fight against obesity and cardiometabolic diseases. Launched on November 20, 2023, the ETF has amassed $58.17 million in assets under management as of April 18, 2024, with a net expense ratio of 0.75% and a portfolio consisting of 44 stocks.
Eli Lilly and Company (NYSE:LLY) is among the prominent holdings of the Tema Cardiovascular and Metabolic ETF (NASDAQ:HRTS). Engaged in the discovery, development, and marketing of human pharmaceuticals, Eli Lilly and Company (NYSE:LLY) garnered attention on April 2 when Citi analyst Andrew Baum raised the price target on its shares to $895 from $675, maintaining a Buy rating.
As of December 2023, Insider Monkey's database indicates that 102 out of 933 hedge funds had acquired and retained shares of Eli Lilly and Company (NYSE:LLY). Among these, Ken Fisher’s Fisher Asset Management held the largest stake in the company, valued at $2.6 billion.
Aristotle Atlantic Core Equity Strategy stated the following regarding Eli Lilly and Company (NYSE:LLY) in its fourth quarter 2023 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a leading pharmaceutical company that develops diabetes, oncology, immunology and neuroscience medicines. The company generates over half of its revenue in the U.S. from its top-selling drugs Trulicity, Verzenio and Taltz. The company operates in a single business segment, Human pharmaceutical products.
Eli Lilly has a deep pipeline in treatment areas focused on metabolic disorders, oncology, immunology and central nervous system disorders. Currently, there are two phase three assets, Orforglipron, an oral GLP-1 and retatrutide, a triple incretin agonist, which have the potential to expand upon the potential success of Mounjaro. We believe that Mounjaro has the potential to commercialize beyond type 2 diabetes and obesity, potentially in the areas mentioned above of heart disease, sleep apnea, fatty liver disease and chronic kidney disease. We believe the premium valuation is supported by this outsized growth profile.”
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Disclosure: None. 10 Best Performing Biotech ETFs in 2024 is originally published on Insider Monkey.
