Biotech ETFs in Focus as the COVID-19 Vaccine Race Intensifies

Sweta Jaiswal, FRM
·6-min read

The number of coronavirus cases in the United States recently crossed the grim mark of 7 million, with a death toll of around 204,000. Moreover, health experts have issued warnings that the outbreak can get severe in the country during the fall and winter period, per a CNN report. Considering the current situation, Johnson & Johnson’s (JNJ) entry into the large pivotal phase III study to evaluate the safety and efficacy of a single dose of its investigational coronavirus vaccine candidate, JNJ-78436735, has been instilling optimism among investors.

J&J is the fourth company to join the vaccine developers already in the Phase 3 clinical trials. The other companies to have already started the Phase 3 clinical trials   are Pfizer (PFE) /BioNTech (BNTX), AstraZeneca (AZN)/Oxford University and Moderna (MRNA), all testing two shots of their respective candidates. Meanwhile, in comparison to rivals, J&J’s coronavirus vaccine candidate enjoys certain advantages. J&J’s coronavirus vaccine is developed using a technology with proven safety standards in vaccines for other diseases. Moreover, the vaccine could need just one shot instead of two and is also not required to be kept frozen, per The New York Times report.

Going on, J&J’s phase III study (ENSEMBLE) will enroll 60,000 adult participants and will compare a single vaccine dose of JNJ-78436735 (previously Ad26.COV2.S) to placebo. It aims to enroll participants in Argentina, Brazil, Chile, Colombia, Mexico, Peru, South Africa and the United States at across more than 200 sites. Results of the phase III study are expected by year end or early next year.

The company plans to manufacture one billion doses of its vaccine every year and expects to apply for emergency use authorization of its vaccine candidate in early 2021.

Should We Expect COVID-19 Vaccine by Elections?

Going by sources, President Trump’s administration is believed to be building pressure on getting a vaccine approved before the elections in November. Meanwhile, the FDA has expressed intentions of not compromising with the vaccine’s quality, safety and efficacy standards when it comes to its decision of approval.

Also, according to some sources, the FDA is considering new coronavirus vaccine guidelines which can result in a vaccine authorization after Election Day. Meanwhile, Dr. Anthony Fauci, leading infectious disease expert, recently commented that a "large proportion" of the United States will not receive the vaccine in 2020, per a CNN report.

However, according to another CNN report, Fauci has commented that COVID-19 vaccinations could "very likely" begin in November or December.

We must not forget here the pledge taken by the leading vaccine developers to restore the faith of public in the vaccine development process in a situation when these companies are facing immense pressure to release the vaccine early. The companies that signed the pledge included AstraZeneca, Johnson & Johnson, Merck (MRCK), Moderna and Novavax (NVAX) along with those which are working in collaboration -- Pfizer and BioNTech, and Sanofi (SNY) and GlaxoSmithKline.

Leading Vaccine Developers Progress So Far

Moderna (MRNA), which is developing this vaccine in collaboration with the National Institute of Allergy and Infectious Diseases, has begun the Phase 3 clinical trial, encompassing 30,000 healthy participants at around 100 research sites in the United States. The company enrolled 25,296 participants out of 30,000 in the study as of Sep 16, 2020. More than 10,000 participants have been administered the second dose. 

Pfizer (PFE) in collaboration with German biotech firm BioNTech has also started its late-stage study on a coronavirus vaccine. The trial comprises around 30,000 participants and will be conducted at nearly 120 sites globally. Meanwhile, Pfizer recently applied to the FDA to expand the late-stage trial to include up to 44,000 participants from 30,000 stated previously. Going on, the company’s CEO Albert Bourla has said that Americans could receive the vaccine before 2020-end if its safety and efficacy are proven successfully, per a CNBC article. According to the same article, the company is expecting to receive key data from the late-stage trials by the end of October.

AstraZeneca’s COVID-19 vaccine candidate, AZD1222, is probably the most advanced in terms of development and is being viewed as one of the first candidates to reach the market. It is developing its COVID-19 vaccine candidate in partnership with Oxford University. Late-stage studies on AZD1222 were ongoing in the United States, U.K., Brazil and South Africa with studies due to start in Japan and Russia shortly. The trials aim to enroll up to 50,000 participants globally.

However, earlier this month, AstraZeneca paused the studies as a patient in the U.K. suffered an unspecified illness. The study in U.K. however was quickly resumed as the Medicines Health Regulatory Authority (MHRA) confirmed that it was safe to do so. Other studies, including the one in the United States, remains on hold and AstraZeneca is working with other health authorities as to when they can resume them.

Biotech ETFs in Spotlight

Johnson & Johnson’s entry into the late-stage trials has increased optimism in the coronavirus vaccine development. Here, we discuss a few ETFs that might gain in such a scenario:

iShares Nasdaq Biotechnology ETF IBB

This fund seeks to provide exposure to U.S. biotechnology and pharmaceutical stocks and tracks the Nasdaq Biotechnology Index. The fund has an AUM of $9.05 billion, with an expense ratio of 0.46% (read: ETFs to Gain as AstraZeneca Resumes Coronavirus Vaccine Trial).

SPDR S&P Biotech ETF XBI

The fund seeks daily investment results, before fees and expenses, which match the S&P Biotechnology Select Industry Index. It has AUM of $5.25 billion and an expense ratio of 0.35% (read: Biotech ETFs Soar on Gilead-Immunomedics Deal).

ARK Genomic Revolution ETF ARKG

This is an actively-managed fund. Companies within ARKG are focused on and are expected to substantially benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments and advancements in genomics into their business. It has AUM of $2.21 billion and an expense ratio of 0.75%.

First Trust NYSE Arca Biotechnology ETF FBT

The fund measures the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. Its AUM is around $1.94 billion (read: How Will Biotech ETFs React to Vaccine Makers' Safety Pledge?).

VanEck Vectors Biotech ETF BBH

The underlying MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. Its AUM is $479.6 million and it has an expense ratio of 0.35%.

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iShares Nasdaq Biotechnology ETF (IBB): ETF Research Reports
 
SPDR SP Biotech ETF (XBI): ETF Research Reports
 
VanEck Vectors Biotech ETF (BBH): ETF Research Reports
 
First Trust NYSE Arca Biotechnology ETF (FBT): ETF Research Reports
 
ARK Genomic Revolution ETF (ARKG): ETF Research Reports
 
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