Value Biotech ETFs & Stocks To Buy Now

This year, biotech stocks have seen their best-ever start to a year since 2012. A solid merger-and-acquisition momentum has been instrumental in this rally. Still, valuation is cheaper for this segment as the Nasdaq Biotechnology Index, which is weighted by market value, is down nearly 20% from the record high set in 2015, per an article published on Wall Street Journal.

M&A Hot in 2019

The announcement of the mega-merger deal between Bristol-Myers (NYSE:BMY) and Celgene (NASDAQ:CELG) in the beginning of 2019 has set the space on fire. Also, Eli Lilly and Company (NYSE:LLY) announced that it will acquire Loxo Oncology for $8 billion to expand its oncology portfolio to precision medicines or targeted therapies.

The winning momentum for M&A started from December 2018, when Glaxo (NYSE:GSK) offered to acquire TESARO for almost $5.1 billion. With this deal, Glaxo’s objective was to get access to TESARO’s PARP inhibitor, Zejula, which is approved for ovarian cancer. There were other announcements like Roche’s (OTC:RHHBY) acquisition of Spark Therapeutics for $4.8 billion and Merck’s (NYSE:MRK) acquisition of Immune Design.

Upbeat Clinical Trials & Listing for FDA Approvals

Biogen (NASDAQ:BIIB) has spread optimism into the broad healthcare sector following its Alzheimer’s treatment report. The biotech company decided to go ahead with the approval of aducanumab, a treatment for early Alzheimer’s diseases, after the drug met the primary endpoint of a Phase 3 Emerge study. If approved, Biogen’s drug would be the first to slow cognitive decline in Alzheimer’s patients, thus opening up huge opportunity for investors (read: Healthcare ETFs Win in October: Here's Why).

Bristol-Myers Squibb also recently announced that its immunotherapy combination of drugs showed strong results in a lung cancer trial. Hepion Pharmaceuticals also led the sector higher following data that showed potential for its CRV431 as a drug candidate for liver disease treatment (read: Biotech ETFs Surge on a Flurry of Positive News).

Low P/E Multiple Rampant in Sector

Many biotech shares can be availed at 12x forward earnings or less against the S&P 500’s 17x, per Wall Street Journal. Though low P/E does not indicate the future stock performance, cheaper valuation is always lucrative amid a spate of good news.

This is especially true given that Biomedical and Genetics belongs to the top-ranked Zacks industry (top 28%). And large-cap pharmaceuticals come from a top-ranked Zacks industry (top 29%).

ETFs in Focus

Below we highlight a few biotech ETFs that have considerably a low P/E in the sector and can benefit investors with solid gains (see all Health Care ETFs here).

SPDR S&P Biotech (NYSE:XBI) ETF XBI – P/E 15.67x

iShares Genomics Immunology and Healthcare ETF IDNA – P/E 17.08x

VanEck Vectors Biotech ETF (LON:BBH) – P/E 19.24x

Stocks in Focus

The below-mentioned biotech stocks have a low P/E and a decent P/E.

AbbVie Inc. (NYSE:ABBV) – P/E 9.16x, Zacks Rank #2 (Buy), Yield 5.38%

Bristol-Myers Squibb Company (NYSE:BMY) – P/E 13.32x, Zacks Rank #2, Yield 2.86%

Amgen Inc. (NASDAQ:AMGN) – P/E 15.09x, Zacks Rank #3, Yield 5.28%

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