Better State Street Healthcare ETF: XBI's Biotech Focus vs. XPH Targeting Pharmaceuticals
Key Points
The State Street SPDR S&P Biotech ETF and State Street SPDR S&P Pharmaceuticals ETF carry identical 0.35% expense ratios.
The State Street SPDR S&P Pharmaceuticals ETF has historically exhibited significantly lower price volatility and a smaller maximum drawdown than its biotech counterpart.
While the State Street S&P Biotech ETF offers a larger basket of 165 holdings, the State Street S&P Pharmaceuticals ETF has delivered higher total returns over the last five years.
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The choice between the State Street SPDR S&P Biotech ETF (NYSEMKT:XBI) and State Street SPDR S&P Pharmaceuticals ETF (NYSEMKT:XPH) centers on an investor's tolerance for volatility and preference for specific healthcare sub-sectors.
Both exchange-traded funds offer targeted exposure to critical segments of the healthcare industry. While the biotechnology sector is characterized by high-growth potential and significant price swings, the pharmaceutical industry often provides a more stable alternative for investors who want healthcare exposure without the intense volatility associated with clinical-stage research firms.
Snapshot (cost & size)
| Metric | XBI | XPH |
|---|---|---|
| Issuer | State Street | State Street |
| Share price | $156.61 (as of 2026-09-28) | $66.89 (as of 2026-09-28) |
| Expense ratio | 0.35% | 0.35% |
| 1-yr return (as of 2026-09-28) | 51.2% | 32.5% |
| Dividend yield | 0.3% | 0.5% |
| Beta | 1.12 | 0.72 |
| AUM | $10.2 billion | $0.6 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
Both funds are equally affordable with an expense ratio of 0.35%, meaning an investor pays $3.5 annually for every $1,000 invested. The State Street SPDR S&P Pharmaceuticals ETF offers a slightly higher payout, though both yields remain low compared to broader market averages.
Performance & risk comparison
| Metric | XBI | XPH |
|---|---|---|
| Max drawdown (5 yr) | (63.9%) | (34.9%) |
| Growth of $1,000 over 5 years (total return) | $1,224.0 | $1,327.0 |
What's inside
The State Street SPDR S&P Pharmaceuticals ETF focuses entirely on the healthcare sector. The fund targets a concentrated selection of established companies within the drug manufacturing space. It holds 62 positions, and its largest positions include Xeris Biopharma Holdings (NASDAQ:XERS) at 2.47%, Amneal Pharmaceuticals (NASDAQ:AMRX) at 2.30%, and Veradermics (NYSE:MANE) at 2.23%. The fund was launched in 2006, and has paid $0.3 per share over the trailing 12 months, which on its recent ~$66.9 share price works out to a 0.4% yield.
The State Street SPDR S&P Biotech ETF provides exposure to 165 holdings, primarily in healthcare at 99% with a 1% tilt toward financial services. The fund covers a broad array of clinical-stage and commercial biotechnology companies, reflecting the high-risk nature of the industry. Its largest positions include Moderna (NASDAQ:MRNA) at 2.10%, Twist Bioscience (NASDAQ:TWST) at 2.07%, and Natera (NASDAQ:NTRA) at 1.80%. This fund was also launched in 2006, and has paid $0.5 per share over the trailing 12 months, which on its recent ~$156.6 share price works out to a 0.3% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
The healthcare industry is expected to see demand for medical services expand over the next decade. State Street offers two distinct ETFs to provide investors with different strategies to gain exposure to this growing sector.
There's the State Street SPDR S&P Pharmaceuticals ETF (XPH) for those who want to focus on drug companies. Meanwhile, the State Street SPDR S&P Biotech ETF (XBI) lets you target the biotechnology sub-segment of the healthcare sector. Both funds have pros and cons that factor into whether one or the other is the better fund.
XBI is for investors who want the high growth potential of biotech companies working on cutting-edge treatments. Medical breakthroughs can send shares soaring, as evidenced by XBI's far superior one-year return. The fund also sports a much larger AUM, delivering better liquidity. However, biotech stocks are volatile, since they are sensitive to regulatory or clinical setbacks. This can be seen in the ETF's larger max drawdown and higher beta.
XPH is for more conservative investors who prefer the much lower volatility of established pharmaceutical giants. The fund also pays a higher dividend yield and a reasonable return, although without the outsized potential of XBI. The downsides include a smaller AUM and number of holdings, which doesn't provide the diversification offered by XBI.
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Robert Izquierdo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Moderna, Natera, and Twist Bioscience. The Motley Fool recommends SPDR Series Trust - SPDR S&P Biotech ETF. The Motley Fool has a disclosure policy.
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