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Can the Global X Genomics and Biotechnology ETF share price recover?

The Global X Genomics and Biotechnology ETF share price has struggled over the past year as inflationary and economic pressures have burdened stock markets around the world. The strong performance of certain biotech companies in the fund may be able to boost the fund in the near future, however.

The Global X Genomics and Biotechnology ETF [GNOM] invests in emerging areas within the healthcare sector, which often involve genomic sequencing and genetic medicines. Genomic sequencing is often considered to be at the centre of the healthcare transformation, meaning that several of the fund’s key holdings could have excellent growth potential.

At the same time, biotechnology and genomics sequencing is highly cost intensive, so the majority of these companies remain unprofitable at the moment. With inflationary pressures lowering the value of future cash flows, this has had a negative effect on the fund in 2022. Rising interest rates have also had an effect, making it more expensive to fund growth and invest in new treatments.

However, despite these headwinds, the sector has still been a hive of activity in 2022, with lower valuations making some companies attractive for takeover. In August, Pfizer [PFE] bought Global Blood Therapeutics [GBT] for $5.4bn and Merck [MRK] acquired Seagen [SGEN] for $40bn, highlighting the healthy environment for biotech stocks. This may bode well for the future of the Global X Genomics and Biotechnology ETF.

Companies in the Global X Genomics and Biotechnology ETF

The fund is made up of 40 biotech companies listed in the US. As of 20 September, the Global X Genomics and Biotechnology ETF has a net asset value of $230.42m and a year-to-date total daily return of -28.52%.

The fund’s largest holding is Sarepta Therapeutics [SRPT] with a weighting of 5.92%, followed by Alnylam Pharmaceuticals [ALNY] at 5.3%. Over the past year, Sarepta Therapeutics share price has also managed to rise 34.5%. The company recently raised $1bn through a recent debt issuance, which is expected to fund operations to reach profitability, a major milestone for the company. Alnylam has also performed well over the past year, with its share price up 15.2% in the 12 months to 19 September. The company received a boost in August when it announced its APOLLO-B phase III trial for patisiran, a RNAi treatment for a genetic heart condition, was successful. In September, Alnylam reported further positive news after its vutrisiran drug for a rare progressive mutation received approval by the European Commission.

The fund’s third largest holding, Beam Therapeutics [BEAM], which makes up 5.14% of the fund, has recently fallen back in its share price. As of 19 September, the Beam Therapeutics share price has fallen 43.6% over the past year. As the company remains in its clinical trial stage and has only just started producing revenues, this is mainly due to the risk-averse nature of investors at present. In the first quarter of the year, it recorded a net loss of $69.2m, while revenues totalled only $8.4m.

Nonetheless, the company has $1.2bn in cash and a compelling array of new drugs close to market. The company’s lead product candidate, BEAM-101, which treats sickle cell disease, is taking a major step forward as it prepares to start human trials. This could have the result of boosting the fund share price.

What do analysts expect for the fund?

Despite the recent decline in share price, analysts remain confident in the future of many of the companies within it. Of 13 analysts providing ratings to the Wall Street Journal, the Beam Therapeutics stock has eight ‘buy’ and five ‘hold’ recommendations. With an average price target of $93, this implies an upside of 72.9% as of 19 September.

Sarepta Therapeutics, the fund’s largest holding, also has a large degree of positive investor sentiment. According to the Wall Street Journal, the stock has 14 ‘buy’ ratings, two ‘overweight’ ratings and five ‘hold’ ratings. The average price target of $130.50 implies an upside of 13.2% from its 19 September closing price.

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