GLP-1 drugs powering IHE's big year

What happened: GLP-1 drugs, notably Eli Lilly's Trulicity, have driven the iShares U.S. Pharmaceuticals ETF (IHE) to a significantly higher 1-year total return compared to the iShares Global Healthcare ETF. Despite holding only 60 stocks, IHE's performance is largely attributed to its top two holdings, Eli Lilly and Amgen, which account for over 30% of its assets. Meanwhile, IHE's higher dividend yield and lower volatility have made it an attractive long-term buy compared to the SPDR S&P Biotech ETF (XBI).

Market impact: The pharmaceutical sector, particularly GLP-1 drugs, has seen increased investor interest and strong performance. This narrative has driven inflows into IHE, which has grown its assets under management to over $1 billion. However, the concentration of IHE's holdings raises concerns about potential risks, as seen in the outsized influence of Eli Lilly and Amgen on its performance.

What to watch next: Investors should closely monitor Eli Lilly's earnings, scheduled for April 27, 2023, as any surprises could significantly impact IHE's performance. Additionally, regulatory decisions on new GLP-1 drugs, such as Semaglutide from Novo Nordisk, will determine the future growth potential of this sector. Lastly, the FDA's ongoing review of Amgen's Aimovig, another key holding in IHE, will also be crucial to watch.