Biotech index gains erased, fund flows into the red

The return of drug pricing rhetoric and global stock market volatility have rocked biotech indexes over the last two weeks, wiping out most of what had been strong year-to-date gains.

Fund flows into the space have also swung into the red over the same period.

The NASDAQ Biotechnology (NBI) and NYSE Arca Biotech (BTK) indexes and the SPDR S&P Biotech ETF (XBI) exchange-traded fund limped to gains of 0.9%, 0.6% and 0.2%, respectively, on Friday.

The increases did little to reverse the losses seen over two extremely volatile weeks caused by newfound fears of higher inflation and potentially faster-than-expected increases in interest rates.

Comments by President Donald Trump that his administration would aim to address the “injustice” of high drug prices during his first State of the Union address on Jan. 30 didn’t help.

Since market close on Jan. 30, the NBI, BTK and XBI are off 9.1%, 9% and 8.4%, respectively.

The Dow Jones Industrial Average (DJIA) and the Standard & Poor’s 500 Index (S&P 500) have each fallen 7.2% over the same period, while the NASDAQ Composite is down 7.1%.

Since the start of the year, the NBI is now down 0.9%, while the BTK is up 4.8% and the XBI has increased 2.5%. The BioCentury 100 was up 0.7% on Friday and is now down 1% YTD.

As of market close on Jan. 29, the NBI had climbed 11%, the BTK was up 17% and the XBI had increased 14.3% -- all significantly outpacing broader market indexes to start the year.

All three are still outperforming on the year, as the DJIA, S&P 500 and NASDAQ are down 2.1%, 2% and 0.4%, respectively.

The market shock has led to continued outflows from biotech funds.

According to data from EPFR Global, fund flows into biotech-dedicated funds were flat at $26 million over the first four weeks of the year.

Over the past two weeks, outflows surged to $836 million, bringing outflows to $810 million YTD.

This capital flight builds on the $6.8 billion in outflows over 2016-17.