Want to invest in small biotech ETFs? Here we profile eight that life science investors may want to look into.
Thanks to exchange-traded funds (ETFs), investors don’t have to be tied to one specific stock. Biotech ETFs allow participants to invest in multiple biotech companies via one vehicle.
The life science sector certainly holds a risk factor, and ETFs are a good way to invest in the industry more safely than by investing in potentially risky small-cap stocks. A key advantage is that even if one company in the group takes a hit, the impact will be less direct for investors.
Below, the Investing News Network takes a look at eight small biotech ETFs for investors to consider. They were selected using ETFdb.com and had total assets of under US$100 million as of February 28, 2020. All other figures were also current as of that date.
1. Principal Healthcare Innovators Index ETF (NASDAQ:BTEC)
Market cap: US$58.56 million
This small-cap biotechnology ETF has a high number of holdings — 184, to be exact. Its top holding is Dexcom (NASDAQ:DXCM), weighted at 4.73 percent; the rest of its top five holdings — BioMarin Pharmaceuticals (NASDAQ:BMRN), Alnylam Pharmaceuticals (NASDAQ:ALNY), Seattle Genetics (NASDAQ:SGEN) and Mylan (NASDAQ:MYL) — all have weights between 3 and 3.5 percent.
As its name implies, this ETF is a healthcare-first ETF, giving investors wide exposure to growth and value shares of mostly small-cap biotech stocks in the healthcare industry. Started on August 19, 2016, the index primarily focuses on US healthcare companies that are in development stage or waiting for regulatory approval rather than companies already selling products on the market.
2. Loncar Cancer Immunotherapy ETF (NASDAQ:CNCR)
Market cap: US$38.32 million
This next biotechnology ETF was launched on October 13, 2015, and tracks 26 holdings focused on cancer therapies that use the body’s own immune system. Of its holdings, the majority are small caps in the clinical-stage biotech sector, with a handful of large-cap immunotherapy industry leaders on the top.
The top five biotech stocks in this ETF are Fate Therapeutics (NASDAQ:FATE) with a 6.82 percent weightage, Moderna (NASDAQ:MRNA) at 6.39 percent, Iovance Biotherapeutics (NASDAQ:IOVA) at 5.41 percent, Regeneron Pharmaceuticals (NASDAQ:REGN) at 4.97 percent and BioNTech (NASDAQ:BNTX) at a 4.5 percent weight.
3. Virtus LifeSci Biotech Clinical Trials ETF (ARCA:BBC)
Market cap: US$33.37 million
This fund tracks biotech companies that are listed in the US and have lead drugs in clinical trials. ETF.com refers to it as a “high-risk and high-reward bet” with a specific focus.
There are 96 holdings included in this biotechnology fund, which was started on December 16, 2014. Its top holdings are Axsome Therapeutics (NASDAQ:AXSM), weighing 1.94 percent; Intra-Cellular Therapies (NASDAQ:ITCI), which holds 1.88 percent; Fate Therapeutics at a 1.84 percent weight; Moderna at a 1.7 percent weight and ChemoCentryx (NASDAQ:CCXI), holding a 1.59 percent weight.
4. iShares Genomics Immunology and Healthcare ETF (ARCA:IDNA)
Market cap: US$26.70 million
The iShares Genomics Immunology and Healthcare ETF began on June 11, 2019. With 48 holdings and an expense ratio of 0.47, the ETF focuses on the investment results of an index that could benefit from long-term growth and innovation in genomics, immunology and bioengineering.
5. Virtus LifeSci Biotech Products ETF (ARCA:BBP)
Market cap: US$25.49 million
Begun on December 16, 2014, the Virtus LifeSci Biotech Products ETF offers investors a portfolio of biotech product companies that have a minimum of one drug therapy approved by the US Food and Drug Administration.
With 45 companies in its portfolio, the ETF’s top five holdings are Momenta Pharmaceuticals (NASDAQ:MNTA), which holds a weight of 4.29 percent; Acceleron Pharma (NASDAQ:XLRN), holding a weight of 4.04 percent; Ultragenyx Pharmaceutical (NASDAQ:RARE), which represents a weight of 3.05 percent; Regeneron Pharmaceuticals, holding a 2.85 percent weight; and United Therapeutics (NASDAQ:UTHR), which holds a weight of 2.76 percent.
6. ProShares UltraPro NASDAQ Biotechnology ETF (NASDAQ:UBIO)
Market cap: US$22.72 million
With 217 holdings, the ProShares UltraPro NASDAQ Biotechnology ETF was begun on June 22, 2015. Its top five components weigh in at more than 5 percent each. Gilead Sciences, Amgen (NASDAQ:AMGN), Vertex Pharmaceuticals (NASDAQ:VRTX), Biogen (NASDAQ:BIIB) and Regeneron Pharmaceuticals are the five top biotechnology companies and large pharma stocks in this fund.
This ETF aims to make a large return for investors, saying it is looking for “three times the return of an index or other benchmark (target) for a single day, as measured from one NAV calculation to the next.”
7. ProShares UltraShort NASDAQ Biotechnology ETF (NASDAQ:BIS)
Market cap: US$20.36 million
One of the oldest on this list, having started on April 7, 2010, the ProShares UltraShort NASDAQ Biotechnology ETF currently tracks a number of top companies within the industry. As it currently stands, it has an impressive 217 holdings, with the five top-weighted companies being Gilead Sciences, Amgen, Vertex Pharmaceuticals, Biogen and Regeneron Pharmaceuticals.
This ETF is the only inverse biotech fund, making it a tactile tool. ProShares’ fact sheet on the fund advises investors to “monitor holdings consistent with their strategies, as frequently as daily.” For this reason it could be a challenging ETF for investors new to the space.
8. Global X Genomics & Biotechnology ETF (NASDAQ:GNOM)
Market cap: US$19.53 million
The Global X Genomics & Biotechnology ETF is the newest addition to this list, having begun on April 5, 2019. According to ETFdb.com, the fund tracks the Solactive Genomics Index.
According to the fund’s summary, it follows companies that could potentially rake in benefits from genomic science advancements, including gene editing, genomic sequencing, genetic medicine and therapy, computational genomics and biotechnology.
This index currently tracks 37 companies in its portfolio, with the top five weighing over 5 percent each on the index. The top five companies are PTC Therapeutics (NASDAQ:PTCT), Biomarin Pharmaceutical (NASDAQ:BMRN), Qiagen (NASDAQ:QGEN), Ultragenyx Pharmaceutical and Sarepta Therapeutics (NASDAQ:SRPT).
This is an updated version of an article originally published by the Investing News Network in 2015.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.