We are heading into the earnings season, and investors are growing concerned over the outlook for biotechnology stocks and sector-related exchange traded funds as bellwether Celgene Corp. (NasdaqGS: CELG) expects weaker-than-expected growth last year.
Biotech stocks were among the worst performers Monday, with the ALPS Medical Breakthroughs ETF (NYSEArca: SBIO), which focuses on small- and mid-cap companies that have one or more drugs in either Phase II or Phase III U.S. FDA clinical trials, down 7.9%.
The broader SPDR S&P Biotech ETF (NYSEArca: XBI), which tracks an equal-weight index of biotechnology companies and focuses on smaller biotech names, declined 8.1% Monday. The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech ETF by assets, decreased 6.5%.
Meanwhile, those who were wary of a potential biotech pullback capitalized off the fall with inverse or bearish ETF options. For instance, the Direxion Daily S&P Biotech Bear Shares (NYSEArca: LABD) takes the -3x or -300% daily performance of the biotech sector, ProShares UltraPro Short NASDAQ Biotechnology (NasdaqGM: ZBIO) also tracks the -3x or -300% daily performance of the Nasdaq Biotechnology Index and ProShares Ultrashort Nasdaq Biotechnology (NasdaqGM: BIS) tracks the -2x or -200% daily performance of the biotech space. On Monday, LABD surged 22.5%, ZBIO jumped 13.3% and BIS gained 9.7%.
Biotech stocks were weakening after Celgen Corp. named Chief Operating Officer Mark Alles as its new CEO and as the firm lowered its 2015 profit guidance, along with a projected 2016 sales that missed analysts’ estimates, reports Tess Stynes for the Wall Street Journal.
CELG fell 6.8% after the announcement.
Celgene estimates adjusted per-share earnings of about $4.71 on net product sales of $9.16 billion for 2015, compare to previous expectations for per-shares profit of $4.75 to $4.85 on sales of $9 billion and $9.5 billion.
Additionally, the biotech company anticipates per-share earnings of $5.50 to $5.70 on net sales of $10.5 billion to $11 billion for 2015, compared to average analyst forecasts of $5.68 per-share profit on revenue of $11.14 billion.
The company will release fourth quarter results on January 28.
The Qiagen (NasdaqGS: QGEN) was also among the worst performers in the biotech space after the genetic testing specialist missed its own forecast for sales and profits last year, especially after accounting for foreign exchange rates and the stronger U.S. dollar, Reuters reports. QGEN declined 12.1% Monday.
iShares Nasdaq Biotechnology ETF
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.