Biotechnology stocks and related exchange traded funds gave back all of their gains this year and then some, and the sector may experience even more pain ahead.
The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech ETF by assets, has declined over 10% since Friday and saw its worst day decline on a record 11.7 million shares traded Monday, reports Jon Shazar for Dealbreaker.
IBB fell about 20% over the past seven trading sessions, its worst seven days ever, putting the sector into bear market territory. The ETF has declined 4.2% year-to-date. [Clinton Delivers Poison Pill To Biotech ETFs]
Even after the recent declines, some believe biotechs have not hit bottom.
Bespoke Investment Group pointed out that the recent biotech pullback was not the first time the sector faced a bear market, Bloomberg reports. Looking back at data from 1992 until now, Bespoke found that bearish price pressure lingered, with an average decline greater than 20%, which suggests that the sector may fall even lower.
“Of the 18 prior bear markets, the average length was about three months (92 days) over which time the index dropped an average of 29.3% (median: -26.7%),” according to Bespoke. “Based on these prior declines, if the current bear market follows the average path, it would imply further downside of about 10% over the course of the next three weeks.”