As Biogen shares surged on the news that the U.S. Food and Drug Administration approved Biogen’s (BIIB) Aduhelm as a treatment for Alzheimer’s disease, some mutual funds were in prime position to benefit from the stock’s nearly 40% rally.
Biotechnology-focused strategies were the obvious winners thanks to heavy positions in Biogen. This was welcome news for biotech-heavy strategies, which have lagged amid the stock market’s rotation away from high-growth stocks toward value names.
But there were others that benefited as well. This notably includes funds managed by Primecap, such as the offerings the firm runs for Vanguard.
For this article, we screened for the funds with the heaviest weightings in Biogen among both index-tracking and actively managed strategies.
In terms of the impact of the news for Biogen shareholders, Monday’s trading was a moonshot.
“Alzheimer’s is a serious disease with significant unmet need,” says Karen Andersen, Morningstar’s healthcare sector strategist on the news. “The drug’s list price ($56,000 annually) is significantly higher than we had assumed. We now model more than $7 billion in Aduhelm global sales by 2030,” she writes. Morningstar raised the fair value estimate for Biogen to $401 from $350 following this news.
Which Funds’ Investors Benefited the Most?
The biggest winners were biotechnology funds, which land in the health Morningstar Category. Funds in this category on average hold 2.14% of their portfolio in Biogen. Here’s a look at some of the top holders of Biogen among passives.
At the top of the list is Invesco Dynamic Biotech & Genome ETF (PBE), where the portfolio’s more than 5% weighting in Biogen led to a one-day gain in the fund of 4.53%. The fund finished Monday’s session up 7.56% for the year to date.
VanEck Vectors Biotech ETF (BBH), with a 4.92% Biogen weight in its portfolio, gained 3.61% Monday and finished with a 14.36% year-to-date return.
Next up are active funds with the highest exposure to Biogen.
Fidelity Select Biotechnology (FBIOX) led Monday’s returns with a 4.22% gain, but the $7.7 billion fund is down 5.7% so far in 2021. Franklin Biotechnology Diversity (FBDIX), which has a Morningstar Analyst Rating of Neutral, posted the second-largest gain Monday at 4%.
The largest funds among Biogen holders are those run by Primecap, including the $12.5 billion Vanguard Primecap (VPCCX) strategy. The Gold-rated Vanguard fund had a rough 2020, but as Morningstar director of manager research Russel Kinnel notes, Primecap has been a longtime holder of Biogen shares, and Biogen’s ups and downs have correlated strongly to Primecap’s fortunes.
According to Morningstar Direct, of the 42.93% return on Vanguard Primecap for the 12 months ended June 7, 1.35% can be attributed to the fund’s Biogen position, which returned 29.06% during that time frame.