Market crash slumps biotech as investors yank $1.2B from funds
After soaring 11% on the highs of JPM hype and mega-sized mergers and acquisitions, the Nasdaq Biotech Index is tumbling in February.
That rapid downshift is tied to investors pulling $1.2 billion out of health care and biotech funds last week, bringing the NBI down 8.2% since the start of the month.
A Thursday night special. For the week ended February 7, biotech had net outflows of $1.21B. (Piper) pic.twitter.com/VvO0OmsmKL
— Brad Loncar (@bradloncar) February 8, 2018
The good news (or perhaps bad news, depending on your perspective) is biotech is not alone in this sudden slip. The Nasdaq Composite, which is heavily weighted with the stocks of tech companies, is showing a near identical trend. The index is down 8.24% since the start of the month.
And earlier this week, the Dow suffered its worst fall in six years, losing over 4% in a single day, triggering a sell-off around the world. The S&P 500 tanked 100 points Thursday by close, down 3.75%.
“We’re now in what we call full correction territory,” Randy Frederick, vice president of trading and derivatives for Charles Schwab, told ABC News.
The fall may not be directly tied to the industry, but it’s a correction many in biotech have been calling for. The collective giddiness over tax reform, a hot IPO season, and flush biotech VC began to send warning signals to prudent investors.
“You keep your hand on the eject button,” an unnamed hedge fund manager told STAT’s Damian Garde in January.
And biotech investor Brad Loncar, responding to questions about Armo, Menlo, and Solid’s IPO performance, wrote me this in an email last month: “To be honest, I think it is all too frothy.”
As much as we’d love to give you a crystal ball for what’s ahead, it’s impossible to predict.
“I’m not ready to call the bottom,” Frederick said. “I always tell people it’s best to wait until you get an ease back in volatility and you get two good, solid days. We haven’t had that.”