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How Did XBI’s Large Caps Perform?

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Reviewing XBI’s large caps

The large-cap stocks of the SPDR S&P Biotech ETF (XBI) went down by 1.2% and underperformed the SPDR S&P 500 ETF (SPY), which went up by 0.2% on April 27, 2016. The large-cap stocks of XBI account for 19.3% in XBI’s portfolio. As of April 27, 2016, XBI holds 11 large-cap stocks in its portfolio. Among them, ten stocks fell and only one stock advanced from its previous close.

The above graph reflects the daily changes of large caps of the SPDR S&P Biotech ETF (XBI) and the SPDR S&P 500 ETF (SPY). Since the beginning of April to date, the SPDR S&P Biotech ETF has given a return of 6.7% while the SPDR S&P 500 ETF has given a return of 1.9%.

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X-Chem and Alexion collaboration

“X-Chem, Inc., a privately held biotechnology company utilizing its industry-leading DNA-Encoded X-Chem (or DEX) drug discovery platform for the identification of first-in-class small molecule therapeutics, announced in a press release that it has achieved a milestone in its drug discovery collaboration with Alexion Pharmaceuticals (ALXN), triggering a payment to X-Chem.” X-Chem met this milestone under a partnership established with Alexion in December 2014. Under the terms of the agreement, Alexion obtains exclusive worldwide rights to develop and commercialize novel molecules arising from the collaboration.

However, Alexion went down 2.1% on April 27. Alexion Pharmaceuticals closed at $150.78 and was trading below its 20-day moving average. Year-to-date (or YTD), Alexion Pharmaceuticals is down by 21%. ~1.9 million shares were traded on the day. Alexion Pharmaceuticals is trading at a 2016 forward price-to-earnings multiple of ~29.2x. Alexion Pharmaceuticals is trading at a discount when compared to its 2016 forward price-to-earnings multiple of Vertex Pharmaceuticals (VRTX) and Regeneron Pharmaceuticals (REGN) whose multiples stood at ~44.2x and ~34.0x, respectively. Alexion Pharmaceuticals has a book value of $36.6 per share and at its current price, the stock is trading at a price-to-book value (or PBV) of ~4.1x. Alexion Pharmaceuticals has a weight of 1.6% in XBI’s portfolio.

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