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.