Biotech ETFs to Suffer as US Backs IP Waiver for COVID-19 Vaccines

·5-min read

The coronavirus pandemic continues to aggravate in some parts of the globe. This has led to efforts from different nations to fill in the coronavirus vaccine supply gap between wealthier and poorer nations. In this regard, the Biden administration recently informed about supporting the waiver of intellectual property protections for COVID-19 vaccines that has been proposed by South Africa and India. This in turn is expected to assist in amplifying the production of vaccines in developing countries.

Thus, U.S. Trade Representative Katherine Tai recently said that “we are for the waiver at the WTO, we are for what the proponents of the waiver are trying to accomplish, which is better access, more manufacturing capability, more shots in arms,” as mentioned in a BloombergQuint article.

Following the announcement, the Biden administration is now expected to encourage other countries to support the proposal and will engage itself in negotiation talks for the waiver at the World Trade Organization, going by the same BloombergQuint article. Moving on, other countries that have taken a similar stance are the European Union, U.K., Japan, Switzerland, Brazil and Norway.

The move has been applauded by the World Health Organization’s director-general, Tedros Adhanom Ghebreyesus. He has appreciated the U.S. decision as a “monumental moment in the fight against Covid-19” reflecting White House’s “moral leadership” in the battle against the pandemic, per a CNBC article.

How Have Vaccine Makers Reacted?

The Pharmaceutical Research and Manufacturers of America holds different views in comparison to the Biden administration’s support for waiving IP protections, per a CNBC article. Notably, prominent vaccine developers like AstraZeneca AZN, Pfizer PFE and Johnson & Johnson JNJ are the members of the group.

Commenting on the move, Stephen J. Ubi, the group’s president and CEO, has said that “in the midst of a deadly pandemic, the Biden Administration has taken an unprecedented step that will undermine our global response to the pandemic and compromise safety. This decision will sow confusion between public and private partners, further weaken already strained supply chains and foster the proliferation of counterfeit vaccines,” as mentioned in a CNBC article.

Biotech ETFs That May Suffer

Shares of major vaccine developers like Pfizer declined 1.7%, while U.S. shares of its German partner BioNTech SE lost 0.6% after tumbling as much as 15% on May 6 (per the verified sources). Moderna MRNA also lost about 1.3% on the same day.

Commenting on the move, Barclays analysts have said that “this measure is a potential risk to the long-term tail for the vaccine players – though we remind investors that the Street and share prices were already skeptical on the longer-term sustainability of these businesses," per a Reuters article.

The coronavirus crisis has created desperation among investors over the accelerated distribution of the coronavirus vaccine to develop herd immunity. In such a scenario, any adverse move in coronavirus vaccine is going to hurt investors’ optimism. Thus, let’s take a look at ETFs that can suffer from the recent development:

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 $512.3 million and it has an expense ratio of 0.35% (read: How Will Biotech ETFs React to These Q1 Earnings Releases?).

iShares Nasdaq Biotechnology ETF IBB

This fund seeks to provide exposure to U.S. biotechnology and pharmaceutical stocks and tracks the Nasdaq Biotechnology Index. IBB has AUM of $9.82 billion with an expense ratio of 0.46% (read: Top COVID-19 Vaccine Stories of April Put Biotech ETFs in Focus).

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. Its AUM is $7.04 billion and expense ratio, 0.35% (read: Best Biotech Stocks & ETFs for mRNA, Gene Editing).

First Trust NYSE Arca Biotechnology Index Fund FBT

The fund replicates as closely as possible, before fees and expenses, the price and yield of the NYSE Arca Biotechnology Index. Its AUM is $1.87 billion and it has an expense ratio of 0.55% (read: A Guide to Biotech ETF Investing Amid the Coronavirus Crisis).

Principal Healthcare Innovators Index ETF BTEC

This fund invests in companies that are leading the charge toward innovative solutions rather than spending money on marketing and distribution by tracking the Nasdaq Healthcare Innovators Index. BTEC charges 42 bps in annual fees and has AUM of $161 million.

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Johnson & Johnson (JNJ) : Free Stock Analysis Report
 
AstraZeneca PLC (AZN) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Moderna, Inc. (MRNA) : Free Stock Analysis Report
 
ISHARES NDQ BIO (IBB): ETF Research Reports
 
SPDR-SP BIOTECH (XBI): ETF Research Reports
 
VANECK-BIOTECH (BBH): ETF Research Reports
 
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PRIN-HLTHCR INV (BTEC): ETF Research Reports
 
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