Since reaching all-time highs on March 19, the three largest biotech exchange traded funds are off 4.4% with the SPDR S&P Biotech ETF (NYSEArca: XBI) ranking as the worst offender of the trio with a loss of 5.7%.

XBI’s recent struggles illustrate the ETF’s risk/reward proposition. As an equal-weight ETF, the $2.1 billion XBI is dependent on the largest biotech stocks, such as Amgen (NasdaqGS: AMGN) and Celgene (NasdaqGS: CELG), than its rivals. With that lack of dependence on large-cap biotechs, XBI is also more levered to takeover activity as it pertains to small- and mid-cap biotechs. And as it has shown in the past, XBI can deliver significant short-term surges if one of its holdings is on the receiving end of favorable FDA news. [ETFs for Biotech Takeover Targets]

However, XBI’s XBI’s weighted average market cap of about $8 billion is well below that of the $44 billion found in the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) and the $24 billion found in the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT). In its favor, XBI is the best performer of the trio and the fourth-best non-leveraged ETF of any type this year.[A Bold Call on Biotech ETFs]

Biotech naysayers have been increasing vocal in recent weeks, but XBI, which is up 20.5% this year, has the potential to quash those criticisms.

“Healthcare is one of four sectors poised to show an increase in year-over-year earnings  in the first quarter,” said State Street Global Advisors Head of Research David Mazza in an email exchange with ETF Trends. “Within the broader healthcare sector, biotechnology has garnered a lot of discussion on valuations after a sizable decline in the past week.”

XBI currently sports a P/E ratio of 27.7, but that is below the 31.17 P/E found on IBB. However, in spite of the significant multiple expansion, biotech’s current 19.1 multiple is equal the health care sector’s PE multiple of forward 12-months EPS and only slightly higher than the broader S&P 1500’s PE multiple of 18X, despite much stronger growth,” saidS&P Capital IQ in a recent research note.

Dinging the health care sector on valuation is not new. That is exactly what the naysayers did a year ago, yet XBI is up nearly 65% over the past 12 months. [Confronting Healthcare Valuations Again]

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