Can the ARK Genomic Revolution ETF Beat Sector Decline?

The ARK Genomic Revolution ETF has oscillated this year, but climbed 7.5% last week on expectations US authorities would approve revolutionary gene-editing therapy from its second-largest holding, CRISPR Therapeutics.

  • Cathie Wood’s ARKG fund climbed 7.5% over the last six sessions.
  • UK approval of gene-editing treatment Casgevy helps drive second-biggest holding CRISPR up 40.1% year-to-date.
  • Overall, ARKG slumps 0.9% year-to-date as biotech theme falters.

The ARK Genomic Revolution ETF [ARKG] has rallied 7.5% in the last six sessions. This increase was likely driven by the share price of its second-largest holding, CRISPR Therapeutics [CRSP], which rose 18.2% across the same period.

CRISPR’s share price may be reacting to the UK’s recent approval for use of its CRISPR gene-editing therapy Casgevy, developed with Vertex Pharmaceuticals [VRTX]. The therapy is designed to treat the blood disorder sickle cell disease.

The share price of CRISPR Therapeutics has soared 40.1% in the last three months, beating the wider biomedical and genetics sector decline of 9.8%, according to data from Zacks Equity Research.

Meanwhile, ARKG’s top holding Exact Sciences [EXAS], with a weighting of 9.5% as of 24 November, fell 7.9% over the last six sessions. The stock is up 33.3% year-to-date.

The ETF is one of the flagship funds actively managed by star investor Cathie Wood’s ARK Invest. It offers exposure to companies in the fields of biotechnology and geonomics, including molecular diagnostics, CRISPR technology and stem cell research. It owns assets worth a total $1.4bn.

Despite last week’s upwards momentum, ARKG has fallen 0.9% year-to-date.

Advancing diagnostic tests

Wisconsin-based Exact Sciences specialises in cancer screening and diagnostics, with a focus on early-stage tumour detection. Products include Cologuard, a test for colorectal cancer and Oncotype DX, which detects recurring breast cancer.

Exact posted better-than-expected third-quarter (Q3) 2023 earnings on 1 November. It announced revenue of $628.3m, up 20.1% year-over-year from $523.1m in 2022.

Screening revenue climbed 31% year-over-year to reach $472m, while precision oncology revenue rose 3% to $156.3m. Net income of $0.8m, a break-even $0.00 per share, represented a considerable jump on Q3 2022’s net loss of $148.8m, or $0.84 loss per share, and comfortably beat Zacks Equity Research’s anticipated loss of $0.49 per share.

The second-largest holding in the ARKG ETF is Switzerland-headquartered CRISPR Therapeutics, with a 6.7% weighting. Investors will be hoping that US approval of CRISPR’s Casgevy treatment could follow the UK’s approval. According to the New York Times, the US Food and Drug Administration could approve Casgevy to treat sickle-cell patients by early December.

At Q3 2023 earnings in early November, CRISPR Therapeutics posted a net loss of $112.2m, an improvement on the $174.5m reported in Q3 2022.

Genomics Sector Slated to Grow

The ARK Genomic Revolution ETF has had a rocky couple of years, and it is still more than 75% below its February 2021 peak.

Top holdings Exact Sciences and CRISPR are delivering undeniably cutting-edge technologies and diagnostics, but have yet to achieve meaningful profitability.

This could soon change. According to a report by MarketsandMarkets, the genomics sector is anticipated to expand rapidly, growing at a CAGR of 12.4% from $46.2bn this year to $83.1bn by 2028.

In November, CRISPR updated on potentially life-changing clinical trials and gene therapy treatments for serious diseases. Samarth Kulkarni, CEO of CRISPR, highlighted the company’s “groundbreaking” work in a statement, saying: “The third quarter marked significant progress across our broad clinical pipeline of potentially curative gene edited therapies.”

At TipRanks, a consensus of 41 analysts rate ARKG a ‘moderate buy’.

In October, analysts at Piper Sandler upgraded Exact Sciences stock from ‘neutral’ to ‘overweight’. At TipRanks, Exact stock is rated a ‘strong buy’ by a consensus of 14 analysts.

CRISPR is rated a ‘moderate buy’ at TipRanks by a consensus of 16 analysts.

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