Will Coronavirus Vaccine & Treatment Optimism Drive These ETFs?

Sweta Jaiswal, FRM
·7-min read

The coronavirus outbreak continues to aggravate in the United States and globally. The United States recorded the highest number of new coronavirus cases since the beginning of the pandemic with the count being 88,521 on Oct 29, per a CNN report.  Citing concerns, Dr. Scott Gottlieb, former commissioner of the US Food and Drug Administration, has said that "we'll cross 100,000 infections at some point in the next couple of weeks, probably. We might do it this week, if all the states report on time," according to a CNN report.

The worsening health crisis is making investors even more desperate for a coronavirus vaccine or treatment launch. Against this backdrop, any positive news highlighting the progress of vaccine developers or antibody manufacturers is expected to instil optimism in investors, especially for some sectors which have suffered the most due to the outbreak.

Vaccine Developers Nearing the Launch

Going by the World Health Organization (WHO) report, more than 150 potential coronavirus vaccine candidates are being currently developed whereas, only 11 experimental candidates have reached the late-stage human trials. The two main front-runners in the coronavirus vaccine development, Moderna (MRNA) and Pfizer (PFE)/BioNTech, are steadily moving toward releasing data from their large, late-stage trial in November, per the sources. Notably, Moderna has also recently mentioned that it is actively preparing for the launch of its coronavirus vaccine candidate.

Meanwhile, AstraZeneca (AZN), which is in collaboration with the Oxford University and Johnson & Johnson (JNJ), have got green signal from the FDA to resume their late-stage coronavirus vaccine trials in the United States. Notably, these companies had paused trials after a trial participant showed some serious health issue which required a thorough review of their safety data.

Progress in COVID-19 Antibodies & Treatment So Far

Regeneron Pharmaceuticals (REGN) recently presented positive, prospective results from an ongoing Phase 2/3 seamless trial in the COVID-19 outpatient setting. The data shows that its investigational antibody cocktail, REGN-COV2, met the primary and key secondary endpoints. Notably, REGN-COV2 has reported significantly decreased viral load and patient medical visits (hospitalizations, emergency room, urgent care visits and/or physician office/telemedicine visits).

Going on, Gilead Sciences (GILD) received FDA approval for the antiviral drug Veklury (remdesivir) for treating patients with COVID-19 requiring hospitalization. Per the company, Veklury aims to stop replication of SARS-CoV-2 as an antiviral drug. Notably, Veklury is now the first and only approved COVID-19 treatment in the United States.

Eli Lilly and Company’s (LLY) initial agreement with the U.S. government to provide 300,000 vials of bamlanivimab (LY-CoV555) 700 mg for $375 million looks encouraging. Lilly’s antibody therapy candidate, LY-CoV555, can be used as a monotherapy for the treatment of higher-risk patients, who have recently been diagnosed with mild-to-moderate COVID-19. Furthermore, a recently-published analysis in the New England Journal of Medicine reflected that Lilly’s experimental antibody treatment has resulted in fewer hospitalizations and "symptom burden" in comparison with those COVID-19 patients who were administered a placebo, per the sources.

ETFs to Gain

Let’s take a look at some ETFs that can gain from the introduction of a coronavirus vaccine:

U.S. Global Jets ETF JETS

The coronavirus outbreak has hammered the U.S. economy, with the airline sector being one of the worst-hit spaces. The virus’ spread resulted in declining air travel, with restrictions imposed by the government. Consequently, airlines’ top lines suffered a material impact as passenger revenues form the largest component of their total revenue base. In fact, with the pandemic showing almost no signs of waning, air travel demand is likely to remain stressed, at least in the near term. Looking at the stressed balance sheets of the carriers, it will be safe to say that the sector will surely get a boost from vaccine development.

The fund provides investors access to the global airline industry, including airline operators and manufacturers from all over the world. The fund has AUM of $1.81 billion, with an expense ratio of 0.60% (read: 5 Top-Performing ETFs of Last Week).

SPDR S&P Regional Banking ETF KRE

The banking industry suffered heavy blows from the coronavirus outbreak. However, the ramp-up in economic activities can offset this downside for the banking sector. Also, with support from the central bank and hopes of a further stimulus by the Congress, banks are expected to fare well in the near term.

The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Regional Banks Select Industry Index. It has AUM of $1.17 billion, with an expense ratio of 0.35% (read: Rising Rates in the Cards? ETFs to Play).

The Industrial Select Sector SPDR Fund XLI

The industrial sector, which took a hit from the disruption of global supply chains and the closedown of factories, is expected to see a boost as the coronavirus outbreak is controlled. The latest update on U.S. manufacturing output does not look very impressive amid the rising coronavirus cases. Per the Federal Reserve’s recently-released data, industrial production, including output at factories, mines and utilities, declined 0.6% in September. The metric has declined for the first time after gaining for four straight months.

The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Industrial Select Sector Index. It has AUM of $12.80 billion, with an expense ratio of 0.13% (read: Will Slowdown in US Manufacturing Hurt Industrial ETFs?).

Vanguard Consumer Discretionary ETF VCR

The coronavirus outbreak has largely impacted the consumer discretionary sector, which attracts a major portion of consumer spending. Major retailers, restaurants and hotels in the United States had to shut down operations domestically and abroad. Also, the pandemic has resulted in some changes in the lifestyle and preferences of Americans. Most of the surveys have found that people are more interested in opting for online shopping rather than visiting a brick-and-mortar store for their purchases of essential food items and supplies. Even as the U.S. economy reopens in phases and social-distancing restrictions are being eased, people will try to minimize human-to-human contact.

The fund seeks to track the performance of the MSCI US Investable Market Consumer Discretionary 25/50 Index that measures the investment return of consumer discretionary stocks. It has has AUM of $3.90 billion, with an expense ratio of 0.10%.

The Energy Select Sector SPDR Fund XLE

The coronavirus pandemic has dealt a heavy blow to the energy sector. Dented global energy demand and oversupply have also been hurting the sector for long. The outbreak has forced operators to cut costs significantly by suspending some of their major activities as well as trimming workforce.

The fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Energy Select Sector Index. It has AUM of $8.58 billion, with an expense ratio of 0.13%.

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Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Industrial Select Sector SPDR ETF (XLI): ETF Research Reports
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
U.S. Global Jets ETF (JETS): ETF Research Reports
SPDR SP Regional Banking ETF (KRE): ETF Research Reports
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