Thanks to exchange-traded funds (ETFs), investors don’t have to be tied to one specific stock. When it comes to biotech ETFs, they give sector participants exposure to many biotech companies via one vehicle.
ETFs are a popular choice as they allow investors to enter the market more safely compared to investing in standalone stocks. A key advantage is that even if one company in the ETF takes a hit, the impact will be less direct.
All other figures were also current as of that date. Read on to learn more about these investment vehicles.
1. ALPS Medical Breakthroughs ETF (ARCA:SBIO)
AUM: US$81.2 million
Launched in December 2014, the ALPS Medical Breakthroughs ETF tracks small- and mid-cap biotech stocks that have one or more drugs in either Phase II or Phase III US FDA clinical trials. Its holdings must have a market cap between US$200 million and US$5 billion.
There are 104 holdings in this biotechnology fund, with about 50 percent being small- and micro-cap stocks. Its top holdings include Nuvalent (NASDAQ:NUVL) at a weight of 3.55 percent, Axsome Therapeutics (NASDAQ:AXSM) at 3.42 percent and Alkermes (NASDAQ:ALKS) at 3.18 percent.
2. Tema Oncology ETF (NASDAQ:CANC)
AUM: US$72.18 million
The Tema Oncology ETF provides exposure to biotech companies operating in the oncology industry. It includes companies developing a range of cancer treatments, including CAR-T cell therapies and bispecific antibodies.
Launched in August 2023, there are 51 holdings in this biotechnology fund, of which about half are small- to mid-cap stocks. Among its top holdings are Roche Holding (OTCQX:RHHBF,SWX:RO) at a weight of 5.32 percent, Eli Lilly and Company (NYSE:LLY) at 5.19 percent and BridgeBio Pharma (NASDAQ:BBIO) at 4.88 percent.
3. Direxion Daily S&P Biotech Bear 3x Shares (ARCA:LABD)
AUM: US$52.8 million
The Direxion Daily S&P Biotech Bear 3x Shares ETF is designed to provide three times the daily return of the inverse of the S&P Biotechnology Select Industry Index, meaning that the ETF rises in value when the index falls and falls in value when the index rises. Leveraged inverse ETFs are designed for short-term trading and are not suitable for holding long-term. They also carry a high degree of risk as they can be significantly affected by market volatility.
Unlike the other ETFs on this list, LABD achieves its investment objective through holding financial contracts such as futures rather than holding individual stocks.
4. Tema Heart and Health ETF (NASDAQ:HRTS)
AUM: US$50.83 million
Launched in November 2023, the Tema GLP-1 Obesity and Cardiometabolic ETF tracks biotech stocks with a focus on diabetes, obesity and cardiovascular diseases. The fund was renamed on March 25 from Tema Cardiovascular and Metabolic ETF, and again on June 27 from the GLP-1 Obesity and Cardiometabolic ETF.
There are 47 holdings in this biotechnology fund, with about 75 percent being large-cap stocks and 18 percent mid-cap. About three-quarters of its holdings are based in the US. Its top holdings are Eli Lilly and Company at a 9.78 percent weight, Abbott Laboratories (NYSE:ABT) at 4.58 percent and Novo Nordisk (NYSE:NVO) at 4.42 percent.
5. ProShares Ultra NASDAQ Biotechnology (NASDAQ:BIB)
AUM: US$47 million
The ProShares Ultra NASDAQ Biotechnology ETF was launched in April 2010 and is leveraged to offer twice daily long exposure to the broad-based NASDAQ Biotechnology Index, making it an ideal choice “for investors with a bullish short-term outlook for biotechnology or pharmaceutical companies.” However, analysts also advise investors with a low risk tolerance or a buy-and-hold strategy against investing in this fund due to its unique nature.
Of the 262 holdings in this ETF, the top biotech stocks are Gilead Sciences (NASDAQ:GILD) at a 5.57 percent weight, Vertex Pharmaceuticals (NASDAQ:VRTX) at 5.53 percent and Amgen (NASDAQ:AMGN) at 5.33 percent.
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.