How are biotech ETFs reacting to Q3 earnings releases? – November 9, 2022

The biotechnology sector has been in an ideal position for some time now. Biotech stocks have been huge beneficiaries of the pandemic as many of these companies were developing new vaccines and treatments for Covid-19, leading to increased IPOs and venture capital investments. But then stocks took a massive dive to rebound now. iShares Biotechnology ETF (IBB Free report) increased by 8% last month (as of November 7, 2022).

According to the FT, hedge funds have started buying downed biotech stocks as they believe ultra-low valuations could revive M&A activity in the space. Many big pharma companies are looking to boost their drug pipelines through acquisitions.

Benefits in a nutshell

In early November, Amgen (AMGN Free Report) reported Q3 2022 earnings of $4.70 per share, which beat Zacks’ consensus estimate of $4.43 as well as our estimate of $4.37 per share. Revenue increased 15% year over year. Lower operating expenses and lower share counts boosted earnings in the quarter.

Total revenue of $6.65 billion also exceeded Zacks’ consensus estimate of $6.57 billion as well as our estimate of $6.61 billion. Total revenue decreased 1% year-over-year due to lower product sales.

Total product revenue decreased 1% from the prior year quarter to $6.32 billion (US: $4.46 billion; non-US: $1.77 billion). The increase in volumes was offset by lower selling prices for several drugs and currency headwinds. Volumes increased 8% in the quarter, offset by a net selling price decline of 5%. Currency movements hurt sales by 2% in the quarter.

End of October, Gilead Sciences (BROWN Free Report) announced better-than-expected third quarter results, driven by continued strong demand for its HIV portfolio with further market share growth for lead treatment Biktarvy, and oncology revenues driven by cell therapy and Trodelvy. Sales of the COVID-19 treatment, Veklury (remdesivir) declined but were better than expected.

The company reported earnings of $1.90 per share in the quarter, which easily beat Zacks’ consensus estimate and our estimate of $1.44, but was down from $2.65 in the quarter. quarter of the previous year. The year-over-year decline was due to the acquisition of MiroBio, as well as lower gross margin and product revenue.

Total revenue of $7 billion exceeded Zacks consensus estimate and our estimate of $6.1 billion, but was down 5% primarily due to lower Veklury sales, partially offset by increased sales of HIV and oncology drugs.

Product sales are now projected between $25.9 billion and $26.2 billion (previous forecast – $24.5 billion to $25 billion). Total product sales, excluding Veklury, are expected to be between $22.5 billion and $22.8 billion (previous forecast: $22 billion to $22.5 billion). Total sales of Veklury are now estimated at approximately $3.4 billion (previous estimate: $2.5 billion). Adjusted earnings per share should be between $6.95 and $7.15 (previous estimate: $6.35 – $6.75). Zacks’ consensus estimate for sales and earnings per share is pegged at $25.29 billion and $6.54, respectively.

End of October, biogenic (IBIB Free Report) reported third-quarter 2022 adjusted earnings per share (EPS) of $4.77, beating Zacks consensus estimate of $4.13 and our model estimate of $4.30. In the year-ago quarter, Biogen reported earnings of $4.77 per share.

Sales were $2.51 billion, down 10% on a reported basis (8% at constant currency) from the prior year quarter, hurt by lower Tecfidera sales. Sales, however, exceeded Zacks’ consensus estimate and our estimates of $2.47 billion and $2.4 billion, respectively.

The company raised its previously released total revenue and adjusted 2022 earnings guidance. previously planned dollars. Adjusted earnings are expected to be between $16.50 and $17.15, up from the previous expectation of $15.25 to $16.75.

Focus on biotech ETFs

We believe it is prudent to discuss a few ETFs with relatively larger exposure to the companies discussed above in the current scenario.

iShares Biotechnology ETF (IBB Free report)

It comprises around 375 holdings, with the companies mentioned above owning around 20% of the fund. It charges 44 basis points of fees.

VanEck Biotech ETF (BBH Free report)

He holds around 25 stocks in his basket, with the companies involved having a weighting of around 25% in the fund. IT charges 35 basis points of fees.

SPDR S&P Biotech ETF (XBI Free report)

He holds about 150 stocks in his basket and gives some weighting to targeted companies. The fund charges 35 basis points in fees.

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