Want to invest in small biotech ETFs? INN profiles seven examples 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 market 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 enter 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 seven small biotech ETFs for investors to consider. They were selected using ETFdb.com and their total assets were under US$100 million as of June 17, 2020. All other figures were also current as of that date.
1. iShares Genomics Immunology and Healthcare ETF (ARCA:IDNA)
Market cap: US$96.25 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.
Its top five components, which each weigh in between 4 and 11 percent, are Moderna (NASDAQ:MRNA), Regeneron Pharmaceuticals (NASDAQ:REGN), Serapta Therapeutics (NASDAQ:SRPT), Exelixis (NASDAQ:EXEL) and Seattle Genetics (NASDAQ:SGEN).
2. Principal Healthcare Innovators Index ETF (NASDAQ:BTEC)
Market cap: US$88.46 million
This small-cap biotechnology ETF has a high number of holdings — 206, to be exact. Its top holding is Moderna, weighted at 4.79 percent; the rest of its top five holdings — Seattle Genetics, Exact Sciences (NASDAQ:EXAS), BioMarin Pharmaceuticals (NASDAQ:BMRN) and Serapta Therapeutics — all have weights between 2.5 and 3 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.
3. Virtus LifeSci Biotech Clinical Trials ETF (ARCA:BBC)
Market cap: US$61.19 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 140 holdings included in this biotechnology fund, which was started on December 16, 2014. Its top holdings are Marinus Pharmaceuticals (NASDAQ:MRNS), weighing 0.88 percent; Odonate Therapeutics (NASDAQ:ODT), weighing 0.87 percent; Arcutix Biotherapeutics (NASDAQ:ARQT), weighing 0.83 percent; Novavax (NASDAQ:NVAX), weighing 0.83 percent; and Editas Medicine (NASDAQ:EDIT), weighing 0.83 percent.
4. Loncar Cancer Immunotherapy ETF (NASDAQ:CNCR)
Market cap: US$48.48 million
This next biotechnology ETF was launched on October 13, 2015, and tracks 30 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 Moderna at 12.09 percent; BioNTech (NASDAQ:BNTX) at a 5.8 percent weight; Fate Therapeutics (NASDAQ:FATE) with a 5.78 percent weightage; Regeneron Pharmaceuticals at 5.51 percent; and Allogene Therapeutics (NASDAQ:ALLO) at 5.25 percent.
5. Global X Genomics & Biotechnology ETF (NASDAQ:GNOM)
Market cap: US$38.04 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.
The top five holdings in this portfolio are Sarepta Therapeutics, CRISPR Therapeutics (NASDAQ:CRSP), Natera (NASDAQ:NTRA), Agilent Technologies (NASDAQ:A) and BioMarin Pharmaceutical (NASDAQ:BMRN), all at a weight range of 3.5 to 5 percent.
6. Virtus LifeSci Biotech Products ETF (ARCA:BBP)
Market cap: US$27.74 million
Begun on December 16, 2014, the Virtus LifeSci Biotech Products ETF offers investors access to a portfolio of biotech product companies that have a minimum of one drug therapy approved by the US Food and Drug Administration.
With 46 companies in its portfolio, the ETF’s top five holdings are Amicus Therapeutics (NASDAQ:FOLD), which holds a weight of 2.55 percent; Momenta Pharmaceuticals (NASDAQ:MNTA) with a weight of 2.51 percent; Epizyme (NASDAQ:EPZM) at 2.37 percent; Karyopharm Therapeutics (NASDAQ:KPTI) at 2.35 percent; and Clovis Energy (NASDAQ:CLVS) at 2.32 percent.
7. ProShares UltraShort NASDAQ Biotechnology ETF (NASDAQ:BIS)
Market cap: US$11.88 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 211 holdings, with the five top-weighted companies being Amgen (NASDAQ:AMGN), Vertex Pharmaceuticals (NASDAQ:VRTX), Gilead Sciences (NASDAQ:GILD), Regeneron Pharmaceuticals and Biogen (NASDAQ:BIIB), all weighted in a range of 5 to 8 percent.
This ETF is the only inverse biotech fund, making it a tactical 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.
This is an updated version of an article originally published by the Investing News Network in 2015.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.