Biotechnology is a sub-sector of stocks within the broader health sector. Biotech companies may focus on a range of industries, including drug development, clinical research, molecular biology, and DNA technology. See the best biotech ETFs, as measured by market performance.
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Investing in Biotech
Investing in biotechnology, or biotech, can be a means for investors to gain focused exposure to stocks of companies in health sub-sector industries, such as drug development and research, molecular biology, diagnostic equipment, and DNA technology. In addition to stocks, investors may choose widespread biotech exposure through ETFs or mutual funds. Biotech funds may be actively-managed but most passively track a biotechnology index, such as the Nasdaq Biotechnology Index or the NYSE Arca Biotechnology Index. The largest biotechnology ETF on the market, as measured by assets under management, is the iShares Biotechnology ETF (IBB).
The State of Biotech in 2022
The outlook for biotechnology in 2022 is questionable. When the broader market, as measured by the S&P 500 index, entered into its first 10% correction in two years, high growth stocks like large-cap technology, biotechnology, and risk stocks in general, saw steeper price declines. Rising interest rates may also continue to hurt growth stocks. As always, investors should perform the necessary due diligence before investing.
Evaluating Biotech ETFs
Investors can research and analyze biotech ETFs with an ETF screener. To use the Seeking Alpha ETF screener to find biotech ETFs, an investor can select the "Sector Equity" asset class, then select the "Health" sub-class. From there, investors can seek and find the ETFs, and also review specific attributes, such as performance, holdings, yield, and risk.
The criteria used for choosing the top biotech ETFs are:
- Performance: 1-year return through March 31, 2022 is the primary selection criteria for evaluating the performance of our featured biotechnology ETFs. However, investors are wise to do further review of longer periods, such as 3-, 5-, and 10-year returns, before choosing an ETF for their portfolio.
- Expenses: Low expenses, as measured by the fund's expense ratio, can be an important measurement for selecting the right ETF.
- Objective: Only ETFs that primarily hold biotechnology health stocks were considered. The ETFs may be actively or passively managed. Alternative objectives and strategies, such as inverse ETFs and leveraged ETFs, were ignored for this list.
- Portfolio holdings: Biotech ETFs typically hold stocks of companies in a range of industries within the biotech and health sector. They may also concentrate holdings on one narrow area of the biotechnology sub-sector.
- Quant Ratings and Factor Grades: Seeking Alpha's Quant Ratings and Factor Grades can be used for evaluating stocks or ETFs. In this article, we share what are called, "Factor Grades," which provide letter grades for five "factors" - Momentum, Expenses, Dividends, Risk, and Asset Flows. To do this, Seeking Alpha compares the relevant metrics for the factor to the same metrics for the other ETFs in its asset class. The factor grades range from a high of A+ to a low of F.
3 Best-Performing Biotech ETFs
To make our list, we measure the top performance for 1-year returns, through March 31, 2022. Investors should keep in mind that past performance is no guarantee of future results and that biotech ETFs can see greater fluctuations in price compared to other equity-based ETFs.
| ETF | 1-Year Performance |
| Pacer Biothreat Strategy ETF | 7.20% |
| First Trust NYSE Arca Biotechnology Index ETF | -7.02% |
| VanEck Biotech ETF | -7.17% |
Note: For consistency in performance comparison among these three biotech ETFs, we use the Nasdaq Biotechnology Index, which was formed in 1993 and is designed to capture the large, mid and small cap segments of the biotechnology and pharmaceutical health sub-sectors. This provides a broader biotech index for reference, although each of the funds may seek to track a narrower index.
1. Pacer Biothreat Strategy ETF (VIRS)
- As of date: March 31, 2022
- 1-year performance: 7.20%
- Expense Ratio: 0.70%, or $70 annually for every $10,000 invested
- Yield: --
- Three-Month Average Daily Volume: 1K
Pacer Biothreat Strategy ETF is an exchange-traded fund that seeks to track the LifeSci BioThreat Strategy Index, which consists of U.S. listed companies whose products or services help to protect against, endure or recover from biological threats to human health.
Pacer Biothreat Strategy ETF Performance
| 1-Year | 3-Year | 5-Year | 10-Year | |
| Pacer Biothreat Strategy ETF | 7.20% | NA | NA | NA |
| Nasdaq Biotechnology Index | -11.16% | 6.54% | 6.93% | 13.02% |
| S&P 500 Index | 15.65% | 18.92% | 15.99% | 14.64% |
The VIRS ETF outperforms the broader biotech index, but is far behind the S&P 500 index. VIRS does not have a long enough track record to compare returns or 3 years or longer. A $10,000 investment in VIRS, 1 year ago, would be worth $10,720 as of March 31, 2022.
Pacer Biothreat Strategy ETF Structure, Objective & Holdings
- Inception Date: 06/24/2020
- Sponsor: Pacer Advisors, Inc
- Ticker: VIRS
- Primary exchange: BATS
- Structure: Open ended investment company
- Objective: Track an index of biotech stocks of U.S. companies that provide products or services designed to protect humans against biological threats.
VIRS ETF Top 10 Holdings
| Holding | Weight |
|---|---|
| MERCK & CO INC (MRK) | 6.61% |
| WLMART INC (WMT) | 6.30% |
| JOHNSON & JOHNSON (JNJ) | 6.22% |
| ABBOTT LABS (ABT) | 5.05% |
| THERMO FISHER SCIENTIFIC INC COM (TMO) | 4.96% |
| SANOFI (SNY) | 4.77% |
| AMAZON COM INC (AMZN) | 4.74% |
| DANAHER CORPORATION (DHR) | 4.73% |
| CVS HEALTH CORP (CVS) | 4.71% |
| LOWES COS INC (LOW) | 4.28% |
Seeking Alpha VIRS ETF Quant Rating Grades do not yet exist for this ETF.
2. First Trust NYSE Arca Biotechnology Index ETF (FBT)
- As of date: March 31, 2022
- 1-year performance: -7.02%
- Expense Ratio: 0.70%, or $70 annually for every $10,000 invested
- Yield: --
- Three-Month Average Daily Volume: 52.8K
First Trust NYSE Arca Biotechnology Index ETF is an exchange-traded fund that seeks to track the NYSE Arca Biotechnology Index, which consists of a cross section of small, mid and large capitalization companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.
First Trust NYSE Arca Biotechnology Index ETF Performance
| 1-Year | 3-Year | 5-Year | 10-Year | |
| First Trust NYSE Arca Biotech ETF | -7.02% | -0.38% | 7.20% | 13.46% |
| Nasdaq Biotechnology Index | -11.16% | 6.54% | 6.93% | 13.02% |
| S&P 500 Index | 15.65% | 18.92% | 15.99% | 14.64% |
FBT doesn't begin to outperform the biotech index until the 5 and 10-year returns, yet it fails to outperform the S&P 500 index during any of the time periods reviewed here.
Here is where a $10,000 investment in FBT, 1 year, 3 years, 5 years, and 10 years ago, would be as of March 31, 2022:
- 1 year ago: $9,298
- 3 years ago: $9,886
- 5 years ago: $14,157
- 10 years ago: $35,353
First Trust NYSE Arca Biotechnology Index ETF
Structure, Objective & Holdings
- Inception Date: 06/19/2006
- Sponsor: First Trust Advisors L.P.
- Ticker: FBT
- Primary exchange: NYSE Arca
- Structure: Open ended investment company
- Objective: Seeks to track the NYSE Arca Biotechnology Index.
FBT ETF Top 10 Holdings
| Holding | Weight |
|---|---|
| Grifols S.A. ADR (GRFS) | 3.73% |
| Ionis Pharmaceuticals, Inc (IONS) | 3.66% |
| Gilead Sciences, Inc (GILD) | 3.58% |
| Biogen Inc (BIIB) | 3.56% |
| Exelixis, Inc (EXEL) | 3.52% |
| Amgen Inc (AMGN) | 3.50% |
| Biomarin Pharmaceutical Inc (BMRN) | 3.48% |
| Mettler-Toledo International Inc (MTD) | 3.46% |
| Alkermes Plc (ALKS) | 3.45% |
| United Therapeutics Corporation (UTHR) | 3.43% |
FBT ETF Quant Rating Grades
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| C | C- | F | C+ | D |
3. VanEck Biotech ETF (BBH)
- As of date: March 31, 2022
- 1-year performance: -7.17%
- Expense Ratio: 0.35%, or $35 annually for every $10,000 invested
- Yield: 0.38%
- Three-Month Average Daily Volume: 23.5K
VanEck Biotech ETF is an exchange-traded fund that seeks to track the MVIS US Listed Biotech 25 Index, which consists of stocks of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment.
VanEck Biotech ETF Performance
| 1-Year | 3-Year | 5-Year | 10-Year | |
| VanEck Biotech ETF | -7.17% | 8.43% | 6.79% | 14.17% |
| Nasdaq Biotechnology Index | -11.16% | 6.54% | 6.93% | 13.02% |
| S&P 500 Index | 15.65% | 18.92% | 15.99% | 14.64% |
The BBH ETF outperforms the broader biotech index, but is far behind the S&P 500 index, for the 1- and 3-year returns. BBH is closer to the index for the 5- and 10-year returns but still lags the S&P 500 for those longer periods.
- 1 year ago: $9,883
- 3 years ago: $12,748
- 5 years ago: $13,888
- 10 years ago: $37,629
VanEck Biotech ETF Structure, Objective & Holdings
- Inception Date: 12/20/2011
- Sponsor: Van Eck Associates Corp
- Ticker: BBH
- Primary exchange: Nasdaq
- Structure: Open ended investment company
- Objective: Seeks to track the MVIS US Listed Biotech 25 Index.
VanEck Biotech ETF Top 10 Holdings
| Holding | Weight% |
|---|---|
| Amgen Inc (AMGN) | 13.00% |
| Moderna Inc (MRNA) | 7.62% |
| Vertex Inc (VRTX) | 6.76% |
| Gilead Sciences Inc (GILD) | 6.60% |
| Regeneron Pharmaceuticals Inc (REGN) | 6.60% |
| Illumina Inc (ILMN) | 5.22% |
| Iqvia Holdings Inc (IQV) | 4.95% |
| Biontech SE (BNTX) | 4.76% |
| Biogen Inc (BIIB) | 4.40% |
| Bio-Techne Corp (TECH) | 4.24% |
BBH ETF Quant Rating Grades
| Momentum | Expenses | Dividends | Risk | Asset Flows |
| D+ | B+ | D | C- | C- |
Bottom Line
Biotech ETFs can be an effective means for investors to gain diversified access to stocks of companies in a range of biotechnology industries, including drug development and research, molecular biology, and DNA technology. However, investors should be aware that the returns for biotechnology stocks can fluctuate more than average.