The biotechnology industry is split between two very different types of companies. On one side are the large, blue-chip leaders like Amgen Inc. (ticker: AMGN), Gilead Sciences Inc. (GILD), Vertex Pharmaceuticals Inc. (VRTX) and Regeneron Pharmaceuticals Inc. (REGN).
These are commercial-stage firms actively selling treatments and generating steady profits. Many produce ample free cash flow to fund further research and development, partner with promising startups, deploy opportunistic share buybacks or pay steady dividend yields.
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“Biotech has remained challenged this year, especially with expectations for rate cuts continually pushed back,” says Rene Reyna, head of thematic and specialty product ETF strategy at Invesco. “However, valuations remain compelling and artificial-intelligence-enabled drug development continues to act as a potential positive catalyst in the near-to-medium term.”
On the other side are clinical-stage biotech companies. These are usually small- to mid-cap firms with little to no revenue. Instead, they rely on large net cash balances that steadily decline each quarter as they fund drug trials in hopes of approval. Returns for these firms tend to be binary and asymmetric.
It is not uncommon to see a clinical-stage biotech stock grind lower for years from cash burn and dilution, only to double or triple on positive trial data or Food and Drug Administration (FDA) approval. However, the opposite is often more likely, with many seeing their valuations collapse after failed studies or regulatory setbacks.
“Given biotechnology firms have limited revenues, if any, from commercialized products, a lot of their market performance is based on the development of investigational treatments,” says Arelis Agosto, director of product research and strategy at Global X ETFs. “From there, only an estimated 9.6% of drugs that enter phase 1 clinical testing are expected to reach the market, though biotechnology treatments that are approved can have remarkable returns.”
This wide gap in business models and risk profiles means the sector can be hit-or-miss for newer investors. With the bigger players, much of the upside may already be priced in. With the smaller players, the odds of sustaining large losses are much higher.
A middle-ground approach is to invest through a biotech exchange-traded fund (ETF), which shifts the thesis from whether a single company will succeed, to whether the biotech industry as a whole will continue to innovate and grow over the long term.
“Instead of being beholden to the binary nature of biotech events, investing in a broader pool of biotech firms helps hedge risk for negative events while still having significant exposure to long-term structural shifts in the health care industry,” Agosto says.
Here are seven of the best biotech ETFs to buy today:
| ETF | Expense ratio |
| VanEck Biotech ETF (BBH) | 0.35% |
| iShares Biotechnology ETF (IBB) | 0.44% |
| First Trust NYSE Arca Biotechnology Index Fund (FBT) | 0.54% |
| Invesco Nasdaq Biotechnology ETF (IBBQ) | 0.19% |
| Invesco Biotechnology & Genome ETF (PBE) | 0.58% |
| SPDR S&P Biotech ETF (XBI) | 0.35% |
| Global X Genomics & Biotechnology ETF (GNOM) | 0.50% |
VanEck Biotech ETF (BBH)
“As innovation accelerates across the health care space, biotechnology continues to be one of the most dynamic and impactful sectors,” says Nick Frasse, product manager at VanEck. “BBH provides focused exposure to the biotech industry by tracking the performance of the largest and most liquid U.S.-listed biotechnology companies.” The benchmark for this ETF is the MVIS US Listed Biotech 25 Index.
“With over a decade of live performance and a disciplined pure-play approach, BBH delivers access to companies at the forefront of medical breakthroughs,” Frasse explains. “The ETF seeks to capture the growth potential of biotech while maintaining a high-conviction portfolio of industry leaders.” Blue-chip biotech stocks like Amgen, Gilead, Vertex and Regeneron are all featured in BBH’s top holdings.
iShares Biotechnology ETF (IBB)
“There is a high risk of failure for biotech companies, as innovations must undergo years of clinical trials and a failure can destroy the equity in a company,” says Adam Grossman, global equity chief investment officer at RiverFront Investment Group. “Therefore, returns in the space are widely dispersed, so picking individual biotech companies that will win is very difficult and risky.”
IBB is an ideal pick for beginner biotech investors. This ETF tracks the market-cap-weighted NYSE Biotechnology Index, so the larger, more stable companies like Gilead, Amgen and Regeneron dominate the top holdings. As a result, IBB is actually slightly less volatile compared to the broad market, with a three-year beta of 0.8. The ETF charges a 0.44% expense ratio, which is reasonable for this category.
First Trust NYSE Arca Biotechnology Index Fund (FBT)
“Unless an investor has a really high risk tolerance and a strong belief that they have an edge in deciding what drugs will make it through trials, we would recommend an investor use the diversification inherent in an ETF to invest in the biotech space,” Grossman says. FBT offers alternative exposure via the NYSE Arca Biotechnology Index, which employs a set of fundamentals-based screeners.
Instead of just weighting biotech stocks by market cap, FBT’s benchmark ranks eligible holdings based on 12-month revenue, net sales to research and development ratio, and percentage change in 12-month research and development expenditures. The highest-scoring 30 stocks are selected for inclusion. However, this more complex methodology comes at a higher 0.54% expense ratio.
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Invesco Nasdaq Biotechnology ETF (IBBQ)
“IBBQ tracks the Nasdaq Biotechnology index and covers all biotechnology and pharmaceuticals stocks listed on the Nasdaq exchange,” Reyna explains. “This benchmark has a 30-year-plus track record and owns more than 200 names.” As with IBB and BBH, IBBQ’s top holdings are still dominated by Gilead, Amgen, Vertex and Regeneron due to its market-cap-weighted index methodology.
Despite tracking competing indexes from the Nasdaq and NYSE, IBBQ and IBB have very similar portfolios, with with about 80% overlap between the two. This high similarity makes them excellent tax-loss harvesting partners because you can sell one to realize a loss while maintaining similar exposure. IBBQ is also cheaper than IBB, with a 0.19% expense ratio.
Invesco Biotechnology & Genome ETF (PBE)
FBT isn’t the only “smart beta” biotech ETF that weights holdings by fundamentals as opposed to market capitalization. In addition to the more passive IBBQ, Invesco also offers PBE. “PBE tracks the Dynamic Biotech & Genome Intellidex Index, which uses multi-factor fundamentals to select 30 biotech names on a quarterly basis,” Reyna explains. “It leans slightly smaller on the market-cap spectrum.”
PBE’s benchmark prioritizes a composite of factors including price momentum, earnings growth, balance sheet quality, management action and relative value. The portfolio is rebalanced and reconstituted quarterly in February, May, August and November to add and drop holdings. However, as with FBT, the use of a more specialized and complex benchmark comes at a higher 0.58% expense ratio.
SPDR S&P Biotech ETF (XBI)
“If I were to invest specifically in this space using a liquid instrument like an ETF, I would prefer XBI,” says Michael Wagner, co-founder and chief operating officer of Omnia Family Wealth. “It uses a modified equal-weight approach that I think makes sense in this space.” Instead of emphasizing the large-cap biotech firms, XBI’s portfolio of 127 holdings features a higher small- and mid-cap allocation.
The top holdings of XBI are simply whichever biotech firms have outperformed between rebalancing cycles. This equal-weighting methodology creates a systematic buy-low, sell-high effect. However, investors should be comfortable with higher volatility due to the emphasis on smaller stocks. XBI charges a 0.35% expense ratio, the same as its market-cap-weighted competitor BBH.
Global X Genomics & Biotechnology ETF (GNOM)
“GNOM specifically only includes firms that fall into one of four key segments for genomics biotech, meaning at least 50% of each firm’s existing or expected revenue comes from either gene editing, genomic sequencing, genetic medicines and therapies, or computational genomics and genetic diagnostics,” Agosto says. This ETF charges a 0.5% expense ratio.
Unlike IBBQ, BBH, and IBB, GNOM’s portfolio features more up-and-coming mid-cap biotech firms. Standouts include CRISPR Therapeutics AG (CRSP), which develops gene-editing therapies that aim to treat genetic diseases by directly altering DNA, and Illumina Inc. (ILMN), a leader in genomic sequencing technology used to map and analyze genetic material for research and diagnostics.
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7 Best Biotech ETFs to Buy Now originally appeared on usnews.com
Update 08/13/25: This story was previously published at an earlier date and has been updated with new information.
