Investors are fleeing the biotech industry’s biggest ETF as the sector becomes a political lightning-rod for Republicans and Democrats alike.
Investors pulled $325 million from BlackRock’s $7.2 billion iShares Nasdaq Biotechnology ETF (IBB) on Tuesday, the biggest one-day outflow for the fund since October 2015, according to data compiled by Bloomberg.
Political uncertainty is hanging over the industry as drug prices become a fraught topic ahead of the U.S. elections. Senators are debating a bill to lower the cost of prescription drugs, while President Trump has said he may use executive action to cut prices. Then there’s the potential for further volatility as the Democratic Party picks between several presidential candidates that have put health care at the heart of their platforms.
“If there is further progress to socialize U.S. medicine and health care, one should expect the budgets for new drug research to suffer the most,” said James Pillow, a managing director at Moors & Cabot.
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The equal-weighted nature of XBI gives the fund greater exposure to developing companies than similar products.
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The fund gained 22% last month, beating more than 1,970 rivals.
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Financial market data — unlike photos or road traffic information or chess games — is finite, and the algorithms can learn only from past performance.
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However, much of the focus in recent days has been on efforts to combat the spread of coronavirus, which has infected more than 44,000 people in China alone.
Biotech stocks have rallied as companies like NanoViricides, Novavax and Inovio Pharmaceuticals announce plans to tackle the illness, potentially leading some investors to lock in their profits — particularly after stellar earnings from the likes of AbbVie and Biogen. IBB has suffered $1.7 billion in outflows during the past year.
“Many people think the coronavirus will subside soon, and they want to take profits after the nice rally IBB has seen since the beginning of the month,” said Matt Maley, an equity strategist at Miller Tabak. The fund is up 7.7% in February. — Additional reporting by Bailey Lipschultz
