The biotechnology sector has been a strong performer for much of
2013. The space has seen huge gains over and above that of the
broad market, with biotech benchmarks outpacing the S&P 500 by
1,000 basis points in some cases for the YTD time frame.
This outperformance of the biotech sector has been especially
apparent during the recent spring swoon in equities that started at
the beginning of April. During this period, biotech managed to hold
up strong despite some troubling performances in many other corners
of the market (read 3 Sector ETFs Surviving This Slump ).
However, as a handful of biotech firms have seen
their own earnings reports come in, the sector has faced some
significant trouble. Key players in the space have reported
lackluster results, suggesting to some that the boom in biotech may
be nearing an end for now.
In particular, there was a very weak report from the sector's
biggest player, Amgen ( AMGN ) ,
which weighed on investors in Wednesday trading. The
California-based firm managed to top earnings estimates, posting
results of $1.95/share compared to expectations of $1.75/share, but
saw sluggish revenues.
Sales were up 5% to $4.24 billion, although analysts were
looking for revenues of $4.37 billion from the biotech giant. This
marked the first time in nearly three years (11 quarters) that the
firm had missed expectations on this front, according to Bloomberg .
This rare miss on sales, pushed shares of AMGN down
significantly in Wednesday trading, with the stock falling by over
6.9% on the day. This also spilled over into other big caps with
firms like Gilead ( GILD ) sliding by 5%,
and Celgene ( CELG
) losing over 6% as well.
And if investors were looking at the broad sector, via biotech
ETFs , the
impact of AMGN's weakness was even more apparent. Four of the
biggest ETFs in this corner of the fund world were down more than
2.2% on the session, including IBB , XBI , FBT , and BBH .
This is a pretty stark reversal for the sector, as biotech ETFs
had been leading the market during the recent bout of turbulence.
The shift is also leading some to think that market leadership
might be shifting, and that other sectors like those related to housing , could be better
plays in the near term.
What about you; do you think the best days are over for
biotechnology, or is this just a temporary slump?
Let us know in the comments section below!
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