The SPDR S&P Biotech ETF (XBI), an equal-weighted index of biotech stocks, has fallen about 22% so far this year through Friday, and is down 37% from its Feb. 8 peak. The ETF has tumbled nearly 9% since Thanksgiving. Biotech has performed worse than all 11 S&P 500 sectors this year, a time when the broader index has notched a total gain of nearly 21%.
Some biotech fund managers are sounding notes of optimism. They see the broad selloff as indiscriminate and note that past declines have been followed by robust rallies. Several high-profile Covid-19 drugs could be on the way and falling valuations may boost merger volume in 2022. A Dec. 1 SVB Leerink research note estimated the biggest U.S. and European biopharmaceutical companies could have more than $500 billion of cash by the end of 2022 to use for deals and other activities, with new debt capacity significantly adding to their firepower.
Firms including San Francisco-based EcoR1 Capital, a rare biotech investor whose hedge funds have made money so far this year, are calling in cash from clients to put into newly cheap stocks, according to people familiar with the matter.
