The Biotechnology sector is known to carry inherent risks as the stock price of a company in this sector can vary wildly based on the outcomes of clinical trials of drugs and regulatory interventions. Yet, investors with a high risk-reward appetite find the sector appealing as the long-term prospects of these companies are highly attractive. Companies from this sector undertake rigorous research and development activities to focus on unmet medical needs and capitalize on technological advancements.
For investors who are not very savvy, investing in BioTech ETFs could be an apt way to gain exposure to the attractive sector while also diversifying company-specific risks. At the same time, the biotech sector is considered a defensive play to shield against the macroeconomic headwinds. We used TipRanks’ ETFs Comparison Tool for BioTech ETFs to compare ALPS Medical Breakthroughs ETF (SBIO), SPDR S&P Biotech ETF (XBI), and Virtus LifeSci Biotech Products ETF (BBP) to determine the best one, according to analysts’ ratings and upside potential.
It is worth noting that the ETF ratings and price targets are based on the consolidated ratings and price targets of each stock in the fund.
TipRanks’ ETF Comparison Tool enables the comparison of ETFs based on several parameters, such as AUM (assets under management), funds flow, expense ratio, technicals, performance over different time periods, and TipRanks Essential tools.
ALPS Medical Breakthroughs ETF (SBIO)
The ALPS Medical Breakthroughs ETF seeks to replicate the performance of the S-Network Medical Breakthroughs Index (PMBI). The ETF provides exposure to small and medium capitalization companies that have one or more drugs in either Phase II or Phase III of the U.S. Food and Drug Administration (FDA) clinical trials.
SBIO has an expense ratio of 0.50%. The ETF also pays an annual dividend of $0.07 per share in December each year, reflecting a yield of 0.22%.
As of July 2, SBIO had an AUM (assets under management) of $104.72 million with 102 holdings in its portfolio. The top three holdings are Krystal Biotech (KRYS), Alkermes (ALKS), and Immunovant (IMVT), representing 10% of the total holdings. SBIO witnessed net outflows of roughly $4 million in the last three months.
Is ALPS Medical Breakthroughs ETF a Buy?
On TipRanks, SBIO ETF has a Strong Buy consensus rating backed by 94 Buys, seven Holds, and one Sell rating. The average ALPS Medical Breakthroughs ETF price target of $65.62 implies 100.2% upside potential from current levels.
SPDR S&P Biotech ETF (XBI)
The SPDR S&P Biotech ETF tracks the performance of the S&P Biotechnology Select Industry Index. The index provides a modified equal-weighted exposure to large, mid, and small-cap companies in the biotechnology sub-sector of the S&P Total Market Index.
The XBI has the lowest expense ratio of 0.35% among the three ETFs discussed here. Notably, XBI paid its most recent dividend of $0.11 per share on June 26, implying a yield of 0.14%.
As of July 1, XBI’s AUM stood at $6.92 billion with 140 holdings. Its top three holdings are Sarepta Therapeutics (SRPT), United Therapeutics (UTHR), and Alnylam Pharmaceuticals (ALNY), representing 9.25% of the portfolio. XBI witnessed net outflows of $501 million in the last three months.
Is XBI a Buy?
With 132 Buys and eight Holds, XBI ETF commands a Strong Buy consensus rating on TipRanks. The average SPDR S&P Biotech ETF price target of $158.37 implies 74.3% upside potential from current levels.
Virtus LifeSci Biotech Products ETF (BBP)
The Virtus LifeSci Biotech Products ETF seeks to replicate the performance of the LifeSci Biotechnology Products Index. The index, in turn, tracks the performance of biotechnology companies that have at least one FDA-approved drug therapy. The index is equal-weighted to ensure that even smaller players with major breakthroughs contribute meaningfully to the overall returns.
The BBP ETF has the highest expense ratio of 0.79% among biotechnology ETFs. As of July 1, BBP had an AUM of $20.69 million and 63 holdings. The top three holdings are Alnylam Pharmaceuticals, Mirum Pharmaceuticals (MIRM), and Sarepta Therapeutics, reflecting 6.57% of the total portfolio.
Is Virtus LifeSci Biotech Products ETF a Buy?
With 59 Buys versus four Hold ratings on TipRanks, BBP ETF has a Strong Buy consensus rating on TipRanks. The average Virtus LifeSci Biotech Products ETF price target of $99.71 implies 72.1% upside potential from current levels.
Ending Thoughts
Among the three BioTech ETFs discussed above, analysts expect the ALPS Medical Breakthroughs ETF (SBIO) to offer the most attractive upside potential in the next twelve months. The SBIO offers exposure to clinical-stage biotech companies with massive growth potential in the long run. Once the drugs of these companies are approved by the FDA and commercialized, they could offer lucrative returns.
